Actual third-quarter earnings may be less important than what business leaders say about their expectations.
Stock market performance during the transition period between outgoing and incoming U.S. presidents tends to be more dependent on the economic cycle than the election results.
The “end of globalization” is a phrase that has come up a lot lately. Stories written about deglobalization have soared this year with the pandemic.
The potential economic and market impacts a “Blue Wave” for the U.S. election could have on five key areas: taxes, labor, the environment, oil and trade.
The biggest political risk facing investors may be the potential for politicians to implement national lockdowns in response to a rise in new COVID-19 cases that could lead to renewed recession and a new bear market for stocks.
The risk of a “no deal” Brexit and the potential economic harm that accompanies it increased last week.
The recent imbalances in the stock market can lead to vulnerability; rebalancing portfolios may be valuable to help balance exposure to U.S. capitalization-weighted benchmarks relative to international stocks.
Confidence matters; faith in a brighter future drives risk taking, fueling growth through investment and consumption.
Although certain high-frequency data haven’t improved markedly, the threat of the virus has started to recede.
Let’s take a look at how recent developments may have impacted long-term returns for stock market investors.
If not extended or replaced, the fading support for the unemployed raises the risk of weakening economic momentum, turning the V-shaped recovery into a W.
U.S. stocks have been fairly resilient lately, even as coronavirus hotspots flare up around the country. Although consumers and businesses are increasingly worried about rolling shutdowns, major stock indexes generally have moved sideways. How long can this continue? Much depends on the shape of the economic recovery.
While no one is ever really comfortable losing money, we often hear from investors that they are most uncomfortable when it seems that the stock market isn’t making any sense whether it’s heading up or down. In order to help try to make sense of it all, let’s take a look at where the stock market makes sense right now and where it doesn’t.
A second wave of global COVID-19 is getting a lot of media attention, but the appearance of a global second wave of cases is primarily driven by the different timing of first waves across countries—rather than second waves within countries.
Why did stocks rise over the past month despite grim economic news? The Federal Reserve’s massive liquidity injection is one reason.
In our 2020 Global Market Outlook, we cited many indicators pointing to heightened risk of a recession; now we highlight increasing signs of a recovery from one.
There may be something amiss with the stock market rebound. Ahead of any meaningful improvement in economic data, global stocks have gained about 30% over the past two months from their low on March 23, as measured by the MSCI World Index.
It is becoming increasingly clear that the massive global stimulus is being financed by a rise in money, not debt.
A lot has happened in the month following global stocks’ low on March 23, as represented by the MSCI All Country World Index. Nearly every major country seems to have put the peak in new COVID-19 cases behind them by several weeks and the discussion has now turned to the timing and staging of re-openings.
The most widely used measure of economic activity, gross domestic product (GDP), will soon be released for the first quarter by different countries.
In a typical recession, the global economy tends to have large imbalances that take a long time to unwind, such as a housing bubble or overinvestment by businesses. This time the global economy is experiencing a shock, rather than the natural end result of a slow build-up of excesses.
Stocks have plummeted this month as investors struggled to assess what impact the COVID-19 coronavirus may have on the economy.
Rather than trying to call the bottom, a more effective way to think about investing right now is to focus more on the duration rather than the decline. Markets may have further to fall, but they may not stay down for the rest of the year barring a severe pandemic.
As a recovery in global manufacturing began to take hold in the fourth quarter of last year, commodity prices rose dramatically. Yet, emerging market (EM) stocks failed to see the similarly strong outperformance of U.S. stocks that typically accompanies rising commodity prices.
Although stocks rebounded after a sharp drop in January, the market’s reaction to the coronavirus outbreak highlighted stock vulnerabilities.
While it is impossible to predict the extent a virus can spread and have greater consequences than past epidemics, history indicates that the global economy and markets have been relatively immune to the effects of past epidemics. A key reason is that global health organizations are prepared for outbreaks and effective when mobilized.
As we head into 2020, investors should be cautious in assuming that the return of central bank balance sheet growth means stocks will follow along. The real driver of the stock market in 2020 may be the outlook for growth tied to prospects for a comprehensive U.S.-China trade deal, which may revive growth in manufacturing and corporate earnings.
While U.S. stocks emerged out of their tight range a couple weeks ago, they have yet to surpass their July highs—as trade uncertainties remain, economic data continues to be mixed, and cloudy monetary policy and political outlooks persist.
Risks to the market are growing but the American consumer continues to look strong. Some preparation for a potential storm are prudent, but no drastic actions are suggested.
The manufacturing side of the economy is showing increasing signs of weakness, but the consumer still looks healthy—which side wins and what should investors do?
Stocks have been buoyed by rate cut expectations, but are investors putting too much stock in monetary policy and setting themselves up for potential disappointments?
The last 18 months have been anything but boring, but if you had ignored the market over that time and only recently started paying attention, you may think that little has happened. The running in place analogy is probably better replaced by hiking a mountain.
The sharp rebound in equities seems to be in contrast to the deterioration in data, which could lead to near-term volatility.
Stocks have rebounded off the lows but we don’t think we’re off to the races; issues remain and investors should remain vigilant.
The end of 2018 will likely morph into more of the same in 2019—higher volatility within a relatively wide equity range, including ongoing corrective phases or even a continuation of what has been a “stealth” bear market this year (rolling bear markets across and within asset classes).
Volatility has ramped up but little has been resolved. Caution continues to be warranted as unresolved issues appear set to continue.
Stock market action recently illustrates again why it’s important for investors to remain disciplined and diversified in a way consistent with their risk tolerances and investment goals. The bull market may have more legs, and upside surprises are possible, but risks have been rising over the past year or so, leading us to be more cautious and recommend that investors limit the risk in their portfolios.
We believe there are three positives, three negatives and three wildcards for stock market performance in the fourth quarter. We expect the balance of these factors to result in further gains for global stocks.
The U.S. equity bull market is intact, but recent action has not been fully-convincing, and we believe risks are rising, especially if we begin to see the same kind of frothy investor sentiment which accompanied the January highs. We continue to push the merits of tried-and-true disciplines like asset class diversification and rebalancing—the latter which forces investors to do what we all know we’re supposed to do, which is buy (or add) low and sell (or trim) high. As the old adage goes, “bulls make money, bears make money, but pigs get slaughtered.”
The recent pickup in market volatility, some choppy action by U.S. stocks, and notable weakness in emerging market stocks have reinforced our belief that we may be at or near an inflection point in economic fundamentals and/or market character. We never suggest trying to time the market in the short-term, but do believe discipline around strategies like rebalancing and diversification is essential at this stage in the cycle. Risks are rising.
Stock indexes have been able to move higher as the balancing act between economic growth and investor concerns continues—but how long will it last?
Rising trade tensions are making us a bit more cautious, although the economic and earnings fundamentals remain healthy, which could cushion some of the blow from a trade war. Stay invested, but don’t reach too far out the risk spectrum, be prepared for bouts of volatility, and remain patient, diversified and disciplined.
The noise surrounding the stock market is getting louder, resulting in more violent moves in equities. Much of the sound and fury is best ignored by long-term investors, but there are growing risks to the bull market in the form of rising trade disputes and the possibility of a central bank mistake. For now, we believe the secular bull market is intact, but are growing more concerned and urge investors to remain disciplined and diversified.
Despite a recent modest pullback in U.S. stocks, and a sharper one in international markets—reflecting both trade worries and the recent strength in the U.S. dollar—we don’t believe it marks the beginning of a more severe correction. Risks of a prolonged trade dispute have risen but it’s too soon to declare war; while the possibility of a positive resolution that would likely be a tailwind for equities. For now, a healthy U.S. economy is an offset to those growing worries. Threats to the current bull market have risen, and they include this being a midterm election year—which have historically been accompanied by larger-than-average maximum drawdowns. We continue to espouse discipline and diversification; but for now it’s in the context of an ongoing bull market.
U.S. stocks have moved toward the top of the recent range but volatility is likely to rise at times during the summer as investors deal with various global geopolitical headwinds. Further strength in the U.S. dollar would likely exacerbate the volatility—particularly within emerging markets. But limited signs of pending recession risk—at least in the United States—should keep the path of least resistance for the stock market higher. That said, patience and discipline are more important than ever in the face of sometimes ominous-sounding headlines.
Stocks have rebounded along with economic data, could we be setting up for a solid summer?
A more challenging investing environment requires a more disciplined and patient investing approach. The next few months could continue to be choppy, but a U.S. and/or global recession still appears a ways off, which should keep the bull market—here and globally—intact.
Headwinds for stocks have risen but tailwinds also exist, resulting in a more tumultuous environment. We believe there are enough positives to keep the bull market going but gains are likely to be slower in coming, volatility is likely to remain elevated and discipline to a long-term plan will be crucial. Avoid overreacting to the barrage of news and focus on the items that could change the actual fundamentals of the economy.
