4 Factors That Could Help End the Downside Volatility
Stocks have been on pretty shaky ground of late. The S&P 500’s all-time high of around 2,930 was actually reached in late September1, and stocks have pulled back and bounced around ever since. There seemed to be quite a bit of chatter in the financial news that once midterms were over, stocks would gain back some certainty that could provide support to prices. But we just haven’t seen it yet.
In our view, however, there is no breakdown in economic fundamentals causing the current volatility. Ups and downs are normal for equity markets, and we believe what we are seeing today is more a symptom of routine volatility than a symptom of an impending recession. But we do believe that there are a few factors that could help ease the current volatility. Here are four:
To help you answer this question, it is important to understand your long-term goals, your risk tolerance, your investment time horizon and other factors that make up your financial situation.
To help you do this I recommend reading our guide, “4 Steps to Managing Your Retirement Assets.”
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1. Trade Breakthrough – the market has arguably been held back for the better part of the year because of uncertainty over the U.S. and China’s trade arrangement. We’re not convinced that the posturing over trade or any impasse at current tariff levels can by themselves trigger a recession. But we do believe that a positive development and/or surprise in the trade arena between the U.S. and China would give the markets a boost. Investors should keep a close eye on the G20 Summit being held in Argentina on November 30 and December 1, as President Trump and Chinese President Xi Jinping are expected to meet on the sidelines.
2. A More Dovish Tone from the Fed in December – in our view, the market is already pricing a December quarter-point rate hike. We’re not convinced that the Fed following through would be a negative event for the markets. But what could emerge as a positive for the markets is if Federal Reserve Chairman Jay Powell strikes a somewhat softer tone in the remarks that accompany the rate decision. Perhaps an indication or affirmation that the Fed maintains a gradual and methodical approach to rate hikes would be beneficial for the markets, or at least acknowledgement that the economy is expected to cool off or level off somewhat in 2019. This type of tone would signal to the market that the Federal Reserve is not inflexible when it comes to monetary policy tightening.
3. Better-Than-Expected Earnings Performance from Tech – the technology sector and particularly the biggest names in the industry, like Google, Facebook, Amazon and others, have felt the brunt of the recent declines. But they’ve also been amongst the best performers on the year, so perhaps some repricing was in order. From here, many investors are starting to come to terms with the notion that earnings may have peaked in this cycle, and that the robust growth rates of quarters’ past are likely to subside. Any upside surprise, particularly with the holiday season upon us, could ease investor concern.
4. Time and Patience – if you view the downside volatility as part of a market correction and not a bear market – as we do – then all it might take is a little time and patience to see the markets get some relief. Corrections oftentimes last several weeks or even months, so for the downside pressure to drag-on for a few more weeks would not be unusual, in our view. Not knowing when the markets will recover and eclipse new all-time highs is unsettling and often times difficult for investors, but in our view, Christmas will come for those who are patient.
While these factors could ease volatility, in my opinion, you do not want to get too caught up trying to predict what will happen next or how these stories could affect the market. In my experience, it can be more beneficial to focus on YOUR financial situation. While you probably can’t predict what will happen next with the market, you can try to prepare for what’s to come.
You may be wondering how you can determine your long-term goals, your risk tolerance, your investment time horizon and other factors that make up your financial situation. This can be a difficult process to navigate on your own. So, to help you get a head start, I would recommend referring to our guide, “4 Steps to Managing Your Retirement Assets.3”
This guide offers insight to help you make critical decisions about your retirement and outlines four simple steps that can give you an added advantage when you retire. Get your free copy today by clicking on the link below.
If you have $500,000 or more to invest and want to learn more, click on the link below to get your free guide today!
2 ZIM may amend or rescind the Guide “4 Steps to Managing your Retirement Assets” for any reason and at ZIM’s discretion.
3 ZIM may amend or rescind the Guide “4 Steps to Managing your Retirement Assets” for any reason and at ZIM’s discretion.
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