Broker Check

Thoughts on The Market

| September 04, 2019
Share |

 

Dramatic declines in global interest rates, the on-again, off-again tariff negotiations, and the tweets coming from the White House have all contributed to a volatile month of August in the markets.  Although some believe the markets are headed lower, we continue to believe the economy is strong and the markets are likely to move higher once volatility settles down.  

On July 31st, the Federal Reserve lowered the federal funds rate.  Analyst consensus would indicate that this may be the first of many interest rate cuts to come.

The below chart from STIR Research illustrates the returns of the S&P 500 following the first-rate cut after a period of stable or rising rates.  Returns are broken into time periods ranging from 3 months to 24 months.

FIGURE 1: S&P 500 RETURNS AFTER FIRST RATE CUT

16 cases over the past 65 years

Sources: STIR Research

If you believe we are in a secular, longer-term bull market, focus on the blue colored bars. If you believe we are in a longer-term secular bear market, focus on the grey shaded bars.  In either case, stocks still look attractive. Past performance is no guarantee about the future; however history primarily shows lower interest rates impacting stock performance in a positive way.

We believe the message we can give you today is to stay diversified, be patient, and think longer-term about this market.  As always, if you should have any questions or would like to talk about your portfolio feel free to give us a call.

 

 

 

The S&P 500 is an unmanaged index which cannot be invested into directly. Stock investing involves risk including loss of principal. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Share |