Welcome to Spring – With Some Volatility for Good Measure

Folks,

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:

  1. The potential impact of tariffs instituted by the Trump administration and the possibility that these lead to trade wars.
  2. 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.
  3. Congress needs to approve a spending bill my midnight on 3/23/18 or we face another government shutdown.
  4. 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.

 

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

 

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

 

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

 

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.

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