Spring “officially” starts at 12:15pm Eastern on March 20, 2018.
Like the crazy weather we have been having recently, Spring is coming in with a new dose of volatility in the financial markets.
The causes appear to be:
- The potential impact of tariffs instituted by the Trump administration and the possibility that these lead to trade wars.
- News that personal information gathered by Facebook back in 2015, was never deleted as promised – leading to a selloff in Facebook stock which is impacting other tech companies like Google, Amazon and Netflix.
- Congress needs to approve a spending bill my midnight on 3/23/18 or we face another government shutdown.
- The first meeting of the Federal Reserve under new Chairman Jerome Powell on March 20-21, 2018.
We are seeing significant selling in the equity markets on Monday 3/19/18, with safe haven assets like US Treasuries and Gold benefiting as investors look for safety.
Like the volatility we saw in February 2018, I believe this latest turbulence is more news driven than a fundamental shift in the economy or financial markets.
The Facebook news is definitely transitory. I don’t believe anyone, including the Trump administration, wants a trade war so that likely is avoided. Congress still has egg on their face from the 2 government shutdowns already this year, so they likely get something passed. Worst case they go with another short-term funding measure to kick the can down the road.
The Federal Reserve is the most important wildcard. The market fully expects a 0.25% rate hike this week. Even with that, interest rates remain low by historical standards and inflation remains below 2%. The big question is what does the Federal Reserve signal about future rate hikes. Right now the market anticipates 2 more 0.25% hikes this year. An indication of more frequent rate increases will likely be received poorly by the markets.
For now I am going to stick with the plan we implemented but will continue to monitor the situation closely.
Feel free to call us if you have any questions or concerns.
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