Given the recent market volatility, we want to share some thoughts and advice with you. Fundamental economic data appears strong but there are a few items that we are following closely. Ultimately, we want to help you understand how this impacts you.
Economic Data Remains Strong
3rd Quarter GDP: Grew at 3.5%. For reference, Q3 2017 grew at 2.8%.1
-The US economy is still expanding.
Unemployment numbers in September showed the lowest figure since December 1969 – 3.7%.1
-Consumer spending remains strong.
Global Purchasing Managers Index came in at 52.2 in September.2
-Readings above 50 indicate growth vs. 1 year earlier.
-US reading is particularly strong with at 55.6. 2
Potential Issues Brewing
Trade tariffs. It’s not a secret that the US and China are engaged in a trade battle/dispute/war. What will the impact be if this is continues to progress? Would we see global activity begin to slow? How about inflation if we can’t source Chinese goods as inexpensively?
Italian debt issues. This hasn’t caught mainstream news attention as much as tariffs, but we’re watching closely. There are some similarities between the recent Greek debt crisis. Fortunately, Italy is in better shape than Greece was; however, its economy is almost 20 times as large ($1.935T GDP) vs Greece ($200.3B). 3
So….what should you do about it?
For many of you, the answer is – nothing. A global, balanced portfolio is diversified across geography, industry, currency, company size, and asset class. There are going to be periods where the market falls, and sometimes the moves lower are particularly sharp or deep. This is a part of investing that many (or all) of you have experienced before.
For some of you, this is an opportune time to reevaluate the risk in your portfolio. On the way up, many investors focus on return. As the markets start to move lower, the focus shifts towards risk management. Our recommendation is to ensure you have the right balance of risk and return throughout the market cycle.
The Bottom Line: If you just aren’t sure how you feel about the market or you aren’t sure about the current level of risk/return tradeoff in your portfolio, then now may be the time to review. We saw strong returns in 2017 and now we’re almost 10 full months into a year that is proving to be more difficult. Are we concerned by this? Not at all. We just wanted to take this opportunity to touch base. If you want to discuss further, we can connect via WebEx, phone, or in person to give each other mutual updates. We’ll tell you about the portfolio and our market outlook. We want to hear about your life and how you feel about the markets. Then, we can ensure you are in the right spot for you, regardless of whether the market moves higher or lower in the coming months.
Sources:
1: US Bureau of Economic Analysis
2: JP Morgan Asset Management
3: World Bank