Many analysts generally link recent market jitters to uncertainty surrounding trade, Fed rate hikes, and global growth prospects into 2019. Of these, the “business cycle is one of the most important drivers of investment performance” (Guggenheim).
According to Earnings Insight, analysts see single-digit earnings growth for the first three quarters of 2019, signaling a slowdown in growth prospects.
A number of macroeconomic factors further pressured the markets in November.
The Group of Twenty (G20) summit in Argentina produced two significant trade deals for the United States, a revised trade agreement with Canada and Mexico as well as a trade tariff truce with China. While initial reception was positive, skepticism surrounding the trade truce with China soon emerged around the details of the trade agreement.
Volatility continued into November spilling over from October’s trading frenzy. All major equity indices saw their gains for the year vanish in mid-November, then rebound at month-end to recapture some of those same gains. Many analysts believe that lower stock valuations are creating buying opportunities for investors.
Market uneasiness was amplified by a drop in oil prices, which declined to levels last seen in late 2017. Analysts attribute the slump to rising supplies and a perceived slowdown in the global economy.
The Fed signaled that it may scale back projected rate increases in 2019. The Fed believes that rates are currently at a level just below its neutral stance, which Fed members estimate to be near 2.9 percent to 3 percent.
The shift in leadership within the House of Representatives leaves various regulations and economically sensitive bills open for debate, yet infrastructure is believed to be a topic of agreement for both parties. Build America Bonds (BABs), which are taxable municipal bonds introduced under the prior administration, are expected to help expand and fund infrastructure projects nationwide. In addition, both parties wish to reduce taxes further for the middle class.
Market pullbacks are common. According to Guggenheim, the S&P 500 has declined between 5 and 10 percent 78 times since 1945, and it took an average of one month to return to its previous level.
Although unnerving, these are the moments we plan for when devising a financial plan. If your portfolio is well-diversified and aligned to your risk tolerance, goals, and time horizon, stay calm and carry on.
How comfortable are you with your game plan for weathering an extended period of market instability? Schedule time with your Wambolt Advisor to take a closer look.
Sources: g20.org, Federal Reserve, NFR, IEA, Commerce Department
Helping plan your financial future gives us purpose. Learn more about our financial planning process.
Learn more on our Blog:
- Strong U.S. dollar impacts economy unevenly
- How tough stance on trade is impacting the markets
- Q&A with Greg Wambolt: Why do you wear a tie?
Follow Us on LinkedIn
This commentary on this website reflects the personal opinions, viewpoints and analyses of the Wambolt & Associates employees providing such comments, and should not be regarded as a description of advisory services provided by Wambolt & Associates or performance returns of any Wambolt & Associates Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Wambolt & Associates manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Wambolt & Associates provides links for your convenience to websites produced by other providers or industry related material. Accessing websites through links directs you away from our website. Wambolt & Associates is not responsible for errors or omissions in the material on third party websites, and does not necessarily approve of or endorse the information provided. Users who gain access to third party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from use of those websites.