The financial markets have been telling a fragmented story ever since the beginning of 2019, but that appears to be changing. Over the past month, the messages coming from stock and bond markets have begun to coalesce in a manner that unfortunately, will likely leave a bearish taste in your mouth.
Article Category: Volatility
We’ve been hyper-focused on the equity market over the past few months so I thought we’d expand our horizons today and look at a few other markets, particularly the bond market. This discussion should dovetail nicely with recent central bank comments suggesting an alteration of their inflation policy framework – something that could have large consequences down road.
Over the last few months we’ve talked a lot about the idea that it is global growth, as opposed to domestic growth, that is presenting the biggest challenges for financial markets. Unfortunately, that message remains relatively unchanged, and is creating a mixed picture for investors.
Let’s begin with a look at economic conditions abroad, and then we’ll circle back to some the not-so-bad developments here in the States.
The final quarter of each year is often a seasonally strong period for stocks, but not so this year, as the market found itself in a seemingly endless freefall. This culminated with the final month of the year being the worse December since the Great Depression, a rather unnerving fact.
But is it possible there’s a silver lining to 2018 that could, in the long run, actually be a net positive? Using some mental gymnastics (which I’m quite good at), I think the answer may actually be yes.
Today’s note is going to focus on what to expect over the long-run in terms of economic growth – and the implications for asset prices. But first, let’s take a quick look back at the treacherous year that was 2018.
Last year really was a year of extremes. We began the year with global growth on solid footing, and optimistic investors pushed the S&P 7% higher in January alone to a crescendo high.