It may be summer, but we all know the economy and markets don’t go on vacation. The first half of 2018 was a friendly reminder that market volatility does exist and this return in volatility was not comfortable for most investors. Despite some dramatic market moments over the past several weeks, it’s critical more than ever to stick with your long term investment strategy and adhere to the principles of diversification and periodic rebalancing. I’ll touch on three main topics below: the markets, the Fed and trade.
Following the upward trajectory of equities in 2017, stocks continued with gains at the beginning of the year, only to shake investors awake in the following months. In spite of this heightened level of volatility, US Equities are still in positive territory with the S&P 500 up 2.65% and Russell Small cap index up 7.6% through the first half of the year. It has been another story for international markets with developed and emerging markets both trading in negative territory through the same time period. It’s important to note that the S&P 500 is still technically in a correction following the downturn in late January early February. It remains to be seen whether or not the markets have more downside to come or if they’ll break out of this technical correction.
What Does The Fed Say?
The Federal Reserve has raised rates twice so far this year putting the federal funds rate in a range between 1.75 and 2 percent and has forecasted two more additional rate hikes this calendar year. The new Fed Chairman, Jerome Powell, stated in June that the economy has strengthened significantly since 2008. He believes it is approaching a “normal” level where it will not need the Fed to be as active in encouraging economic activity. Overall, he is optimistic, believing the economic outlook for the US is good with a strong economy, strong labor market, and strong growth. All eyes remain on the Fed as they continue down the path towards policy normalization.
Trade Risks Are Up
The potential for a full blown trade war has moved front and center on the economic stage. Earlier in the year, the US administration made the decision to impose a 25% tax on steel imports and a 10% tax on aluminum imports. June’s G7 meeting ended on a sour note as the US made clear their dissatisfaction with current trade agreements. There has been much discussion about the limited impact this may have on the economy given the current fiscal stimulus we see in the US. The problem with this view is that it can be shortsighted, given the fact that future business and consumer confidence effects are hard to measure at this point in the negotiations.
The Economy And Your Finances
As the markets have shown in recent weeks, it’s important to make sure you are comfortable with the risk level in your portfolio. At Fiduciary Wealth Management, we work closely with you to create a personalized portfolio and are committed to closely monitoring your strategies and progress on an ongoing basis. If it’s been a while since you’ve evaluated your financial situation and want a second opinion on your current investment portfolio, or if you simply have questions about the state of the economy, schedule a phone call now!
About Rocklin Senavinin, CFP®
With nearly 20 years of experience in the financial planning industry, Roc has dedicated his career to helping individuals live comfortably in retirement and enjoy the assets they have spent their career building. He is co-founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the holistic process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long-term. To learn more, connect with Roc onLinkedIn or visitwww.fidwm.com. If you have questions, feel free toschedule a phone call using this link.
Sources: J.P. Morgan Asset Management; Fortune.com; nytimes.com
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