Lindsey Report November 2018

Halloween for kids was the last night of October, but for equity investors, the month of October was pretty scary or, at a minimum, a really bad costume. As you are likely aware, equities took a tumble in October: Nasdaq down 9%, S&P 500 down nearly 7% and the Dow down 5%. The selling was not limited to the U.S. Equities overseas were noticeably down. Developed countries, excluding the U.S. and Canada were down 7.9% (as measured by MSCI EAFE) (CNN Business). By the way, this was despite a strong, 2-day rally to end the month: I hope rally lasts!

There are a variety of contributing factors that pundits suggest as the cause: I am only highlighting the jump in interest rates and the concern that the Federal Reserve (Fed) might increase rates too high, too fast. The Fed raised rates on 9/26, but then a few days later, Fed Chairman Powell commented on rates saying, “we are a long way from neutral” (CNBC).

One interpretation was that there may be many more rate hikes to come. As I’ve noted many times, markets dislike uncertainty. Within two days of his comments, the 10-year U.S. Treasury rate had jumped to 3.23%, hitting the highest level since 2011 (Macrotrends). Worries about rising interest rates and/or a quick spike in rates can spook not only the equity markets, but the bond markets as well.

Some of the other issues that may be negatively impacting the markets are: China trade, concerns that higher rates will negatively impact housing and auto markets, some uninspiring results from big tech, as well as a concern that the economy and earnings may have peaked.

Ironically though, the Fed Chairman cited a “remarkably positive outlook” for a U.S. economy enjoying both low employment and moderate inflation. Moreover, he said, “forecasters are predicting that these favorable conditions are likely to continue” (CNBC).

In addition, the economy grew at a 3.5% (Q3), corporate earnings exceeding 25% in Q3 (CNBC), consumer confidence at an 18-year high (AP) and amazingly, there are 7.1mil job openings, which is more than the 5.9mil considered to be unemployed (DOL)…among other things going well.

 

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