The advisors at River Wealth are committed to enriching investors by sharing their insights and understanding of the market by regularly publishing the Market Currents in our quarterly Currents Newsletter.
First Quarter 2018
Following an exceptionally long period of calm and expanding equity markets, volatility returned in February. Since then, markets have moved sharply in reaction to news reports, as investors attempt to assess the potential implications of global developments. However, underlying the seemingly endless flow of news is a fairly healthy domestic economy with low inflation, continued earnings growth, and a global economy that is expanding. With this fundamental backdrop, the recent spate of volatility, largely tied to daily news and twitter feeds, is much less concerning. When focusing on long-term financial goals and objectives, discipline and the ability to see past short-run volatility and market corrections is critical.
Global Economic Conditions – Ten years after the Global Financial Crisis, we are now in what is being referred to as a period of global synchronized growth. Every major economy worldwide is expanding economically. The U.S. is now in its ninth year of expansion and expectations are for increased economic growth, propelled by last year’s tax cuts. The International Monetary Fund now estimates that global growth will reach 3.9% this year, up from 3.7% last year and 3.2% in 2016.
Corporate Earnings – Corporate earnings growth has accelerated largely boosted by the recent tax overhaul in the U.S., which significantly reduced corporate tax rates. Expectations for 2018 remain optimistic as analysts project double digit earnings growth to continue. Thus far, the majority of companies reporting 1st Quarter earnings have provided shareholders with positive reports.
Domestic policy activity – Following a year where domestic policy was a significant focus of investor attention, the current policy agenda has attracted much less attention. That could change if an infrastructure bill gains some momentum, or if trade issues reach Congress.
Central Bank activity, rates and inflation – In March the Federal Reserve increased the Federal Funds rate, a widely expected move, to a range of 1.50% to 1.75%. Despite an expanding economic and employment situation, rates remain relatively low and modest inflation numbers have given the Fed room to act gradually. It is broadly expected that the Fed will increase rates three times in 2018.
Geopolitical concerns – As has been the case for some time, underlying what seems to be a fundamentally sound economic situation is the specter of geopolitical events. Most recently, trade policy and military conflict. While a true trade war would indeed be economically disruptive, all we have seen so far is talk, not policy. Likewise, recent military action in Syria and potential conflicts elsewhere, may result in short-term market reactions. Unless these become protracted military campaigns, history indicates that their market impact will be short lived.
With volatility back in financial markets, being driven by minute-by-minute news flow, it is important to keep things in perspective, and recall that uncertainty and volatility are normal parts of investing and functioning markets. As always, we encourage you to remain focused on long-term objectives.
Please note that it is the intent of your Plan to be 404(c) compliant. This means that you will receive sufficient information through various documents to make initial and ongoing investment decisions and that Plan fiduciaries are relieved of liability for losses resulting from participants’ investment decisions.
In addition, fees shown on your brokerage account statement listed as “Other Plan Fee” are administrative fees.
Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
Please note that this content was created as of the specific date indicated and reflects the author’s views as of that date. It will be kept solely for historical purposes, and the author’s opinions may change, without notice, in reaction to shifting economic, market, business, and other conditions.
Any information contained herein obtained from third-party sources is believed to be reliable, but its accuracy or completeness is not guaranteed.
Indices are unmanaged, do not incur fees or expenses, and cannot be invested in directly.
The advisors at River Wealth are committed to enriching investors by sharing their insights and understanding of the market by regularly publishing the Market Currents commentary and the quarterly Currents Newsletter. Sign up for your complimentary subscription today.
Yes, I would like to receive River Wealth's Currents Newsletter