Despite the panic that seems to have infiltrated the financial media over the past couple of weeks, there is no evidence of an inevitable recession. The S&P 500 peaked just three weeks ago and is still less than 10% from those highs. The sky isn't falling just yet.
Here's what we think is happening. The influx of stories about trade wars, tariffs, and general political risks has been overwhelming. Even if some of these events have far reaching implications to both domestic and global financial markets, most of the current analysis is still based purely on speculation. With speculation comes a rise in volatility and fast moves, especially amongst any sectors that were showing even the slightest signs of being overvalued.
With the rise of volatility in the equity markets, we are still seeing no damage to the bond market or any signs of credit stress. Until this short term panic begins to spread and cause instability in the bond market, we don't see this as a reason to panic. The unpredictable nature of the current administration is bound to cause greater swings as investors try to navigate a quickly shifting economic landscape.
That being said, we still see plenty of opportunities among equities. There have consistently been pockets of strength that have held up incredibly well despite the downturn in the underlying indexes. Staying nimble and calm during these periods of increased volatility is the key to not getting whipsawed by making rash decisions.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. The content is developed from sources believed to be providing accurate information.
The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.