Market Matters to Watch in Fourth Quarter 2018

September 24, 2018

September 2018 marks the 10-year anniversary of the Lehman Brothers collapse and what many point to as the start of the “Great Financial Crisis.” A quick online search will return a number of insightful articles about the topic – what caused it, what it meant to the world – and I expect many more to be written throughout the month. Studying economic and market declines is important, so we can attempt to learn from past mistakes. However, if we focus solely on preventing what caused the last downturn, we’re likely to miss what’s heading our way next.

At Wymer Brownlee Wealth Strategies, we strive to be forward thinking, and these are the “Market Matters” we’re watching closely over the next few months:

  • Impact of trade on investing opportunities. Remaining optimistic that trade gets settled, or at least doesn’t get more contentious, I expect to see company fundamentals remain strong for U.S. companies. As par for the course this year, international and emerging markets haven’t performed as well as U.S. companies (Morningstar, Index Performance). I think it will continue to be difficult to find favorable investing opportunities in those sectors*.
  • Economic health and potential for recession. Despite chatter that we might be at or near the end of a market cycle and headed toward a recession, I’m not sure I see one on the horizon. The Conference Board Leading Economic Index (LEI) for the United States has historically been a good predictor of coming recessions. It’s an aggregate of several leading economic indicators (statistics that signal economic or market movements), and when it was updated in July of 2018, it was signaling that the U.S. economy should continue to expand at a solid pace for the remainder of the year. While the Index isn’t perfect, in my opinion it’s often a good indicator for near-term performance.
  • Interest rate increases and use of bonds in portfolios. I anticipate that the Fed will continue to raise rates – at least one more rate increase before the end of the year, if not two. This could make it hard to find opportunities that add return in the fixed-income world. Though most advisors use bonds as a risk diversifier*, it’s important to remember that they aren’t risk-free. I expect to see volatility in the bond markets through the end of the year, but I believe they remain a good long-term addition to portfolios if diligence is taken to pick appropriate holdings.

There’s no doubt that many factors that affect investors’ success are outside of anyone’s control, but if one looks at the big picture, they may find themselves better prepared to adapt and capitalize on opportunities that come along.

 

Blog by Andrew Gaskill, Financial Services Manager.

*NOTE: Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. Investments in individual sectors may be more volatile than investments that diversify across many industry sectors and companies. Certain sectors of the market may expose an investor to more risk than others. 

SOURCES:
https://money.cnn.com/2018/09/14/investing/lehman-brothers-2008-crisis/index.html
http://news.morningstar.com/index/indexReturn.html
https://www.conference-board.org/pdf_free/press/US%20LEI%20-%20Press%20Release%20AUGUST%202018.pdf

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