Expect Market Volatility to ContinueSubmitted by Bond & Devick Wealth Partners on January 14th, 2019
The 4th quarter of 2018 saw the stock market decline by the most since 2011. We have been anticipating this correction for quite some time as the S&P 500 declines by 20% every 2 ½ - 3 years and it has been 7 years since investors have witnessed a bear market. We believe the cause of the decline was a combination of the markets fear of interest rates rising too rapidly, a general slowdown in the global economy, apparently no resolution in sight for a trade agreement with China and political uncertainty around the government shutdown in the U.S.
Through January 9th, the S&P 500 is up over 10% since the bottom reached in December, which gives us hope that the worst may be behind us. Fed Chairman Powell has sent signals that the Fed may not be as aggressive with interest rate hikes in 2019 as they had thought a few months ago. We believe this has helped fuel the rebound. However, the other above issues have not been resolved.
The U.S. government shutdown continues to drag on with no resolution in sight. China-U.S. trade negotiations are ongoing, but it is hard to decipher if any real progress is being made and data continues to be reported that the global economy is still slowing.
This list of uncertainty has created a negative environment for stocks and we believe we are in an environment that any good news, such as an end to the U.S. government shutdown or real progress in China-U.S. trade negotiations, could help the market move higher. Also, the markets could move higher if the Fed alters its policy with regards to its balance sheet and commits to keeping rates low.
Of course, there is uncertainty about the outcomes of any of the above issues which is why we believe market volatility will continue to be high for some time to come.
Our portfolios are always designed to be balanced and diversified and we believe a disciplined approach to investing is the best way for our clients to reach their goals over the long run.