September 2019 Market Insights

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    Linda S. Parenti, CFA
    Chief Investment Strategist

    September 12, 2019

    It was just a month ago that the markets seemed convinced a U.S. recession could be on the horizon. In response, interest rates fell abruptly, which in turn caused bond prices to rise. Market volatility jumped higher as equity prices fell sharply several times during August.

    Since then the imminent recession fears have faded somewhat, and the scene looks a bit different today. Interest rates have climbed back up, negatively impacting fixed income maturities. Stock market volatility has subsided, and the S&P 500 is again trading near record highs as of today’s close. There have also been large swings in the performance of equity market constituents in recent weeks. Economically sensitive sectors which had previously been lagging have strongly outperformed the more defensive segments.

    Why the summersault? The better than expected second quarter earnings season had ended, so market participants have been increasingly focused on the economy. While not all economic data points have beat expectations, the overall read is one of continued growth. Albeit slower growth than last year, but not necessarily signaling a recession. Add to this the recent small, but positive gestures of postponing tariffs on select goods between the U.S. and China. Accommodative monetary policies from global central banks are also supportive of equity markets. This includes our Federal Reserve, which is widely expected to cut interest rates by a quarter percent following next week’s Federal Open Market Committee meeting.

    Of course, sentiment could again turn on a dime with the next presidential tweet. Thanks to instantaneous information flow and algorithmic trading programs, market timing has never been a riskier strategy than it is today. Rather than let fear, greed, or presidential tweets lead your investment strategy, in the long run it is financially healthier to stay aligned with a disciplined financial plan.

    Views and opinions expressed here are for informational and educational purposes only and may change at any time based on market or other conditions or may not come to pass. This material is not a solicitation to buy or sell securities and should not be considered specific legal, investment, or tax advice. The information provided does not consider the objectives, financial situation, or needs of any specific individual. All investments carry a degree of risk and there is no certainty that an investment will provide positive performance over any stated period. Equity investments are subject to company specific and market risks. Equities may decline in response to adverse company news, industry developments, or economic data. Fixed income securities are subject to market, credit, and interest rate risks. As interest rates rise, bond prices may fall. Past performance is no guarantee of future results.