Q4 2018 – Special Update
With much recent volatility across the global markets, we wanted to provide an update as to what has been going on. Risk-friendly and risk-averse assets continue along the fluctuating path as investors globally attempt to understand the various economic and geopolitical headwinds—the fragile trade truce between US and China, and the growing consensus around the “when, not if” recession watch.
After a decade of never before seen liquidity infusion, courtesy of global central banks, liquidity is now draining out of the system as central banks around the world are moving towards stricter monetary policies.
With volatility likely to continue, investor sentiment is likely to swing as optimism will likely fade. The key sources of this recent market volatility are as follows:
- USA vs China: Agreements were made between China’s President Xi and US President Trump which postponed the ongoing tariff battle. However, this lead to concerns as investors began to think this reprieve is a mere delay as no real meaningful progress is being made. Recently, the optimism faded to pessimism as the US issued an arrest of the CFO of Huawei, as she was detained in Vancouver.
- Fading Growth and Expectations: Many forecasters are now looking at global slowdown and a recessionary outlook. Fluctuating market changes have pushed the market view to an inflationary outlook as investors reduced their collective expectations regarding central banks.
With expectations fading, growth and earnings slowing, many investors are waving the red flag.
- Yield Curve Inversions: A common indicator of a looming recession is the inverting yield curve. With the long-term rates falling more than the short-term rates, many people are suck wondering if this data will supports the next recession.
What can you do?
Three important take-aways: First, the political landscape is going to be an ongoing headwind as the year changes. Second, rolling bear markets may continue as sectors and asset classes continue to reprice from receding liquidity. Third, the risk of a recession is rising.
These short-term inconsistencies shouldn’t make you lose focus of your overall financial objectives, which is why here at Ciccone-McKay our investment philosophy is centered around diversification and balance. We value long-term planning ensuring our clients stay on course through turbulent times.
All the best,