Lindsey Report December ’18

November proved to be another tumultuous month for domestic equities (as measured by the S&P 500). After a sharp recovery to begin the month, equities quickly turned south and retested the lows hit in October, only to sharply recover by month’s end (AP).

As I have noted many times in the past, markets dislike uncertainty. Of course this is a relative concept, as nothing is ever “certain”. Still, there are a number of issues contributing to “uncertainty”, but a couple of them appeared to gain some clarity by month’s end.

The first revolves around interest rates. The Federal Reserve (Fed) has been raising rates for three years, taking it from 0% to its current 2 – 2.25% range (moneycafe). Fed Chairman Powell notes that their goal is to have rates “that would be neutral for the economy – that is, neither speeding up nor slowing down growth” (NBC). The obvious question is: what level is “neutral”?

In October, Powell stated the Fed was “a long way” from neutral, which the markets did not like. However, in a speech on 11/28, he stated that interest rates remain “just below” the neutral level, giving the impression that we are close to neutral and that the Fed may only hike rates a few times in the coming year (NYT). Apparently the markets liked this clarification, as the Dow surged 618 points 11/28, erasing all November losses (WP).

The second uncertainty continues to be the ongoing trade talks with China. While the G20 takes place every year, I can’t recall anything of significance coming from previous meetings, save for some unusual photos in the home countries attire. This past G20 was certainly different: to start, Mexico, Canada and U.S. signed the New NAFTA agreement called USMCA (WP).

The dinner with President Xi to potentially de-escalate trade tensions was paramount. As of Sunday, 12/2, it appeared they had made progress by announcing a “truce” on new tariffs (AP): The Dow posted a healthy gain on Monday, 12/3. Somehow, by Tuesday, uncertainty returned, and the Dow tumbled (MSN). While I believe, we need to level the playing field with China and prevent intellectual property theft, I’m hopeful for a resolution (clarity), sooner rather than later.

 

The opinions voiced are for informational purposes only and are not intended to provide specific advice to any individual. To determine which investments are appropriate for you, consult myself prior to investing. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. The economic forecasts set forth in this commentary may not develop as predicted and there can be no guarantees that strategies promoted will be successful.

Share This Post

Related Articles

Leave a Reply

© 2019 Cleat Lindsey. All rights reserved. Site Admin · Entries RSS · Comments RSS
Powered by WordPress · Designed by Theme Junkie