I would like to thank you for being such great clients and friends. Wow, the first quarter is already over. Between the markets and my kids, I have truly been busy and it has flown by.
After just three months, the market has rebounded nicely and last year’s losses are behind us. Most of us are now ahead of where we started last year.
Volatility in the last few months of 2018 certainly caused some stress and anxiety. Issues such as recession and inflation worries, the inverted yield curve, slowing economic growth, slowing earnings growth, geopolitical issues such as the trade wars and tariffs with China and finally the multitude of issues surrounding President Trump all contributed to the volatility. All these factors are real and need to be kept in mind as we move forward.
It seems that currently, the most important factor is the Fed and after that our President and trade negotiations. The Fed has changed its posture and recently announced that no new hikes are in store for this year. The Fed is now acting very friendly towards the market.
Interest rates have come down quite a bit which is better for equities. The ten-year treasury is at a 14-month low as of March, 21 2019 from over 3.2% to about 2.5%. There is also hope that a deal with China will be finalized within a short amount of time.
I said the following in my last newsletter, and it seems that the markets are now in line with me. “In spite of this, economic growth is still at a higher level than in years past. Earnings are still up, unemployment is near all time lows, wages are rising, and the consumer is spending. Furthermore, I don’t believe that there is a recession coming anytime soon. In fact, historically when the yield curves invert, a recession usually 18 to 24 months thereafter. Inflation is not out of control, with the price of housing l coming down. Even though interest rates have moved higher (but not yet at a historical point), it seems to me that investors have yet to come to the belief that they will compete with equities. I also believe valuations have come down to levels that are very reasonable on a historical basis especially considering the growth rates that many companies are still exhibiting.”
Currently, I am still using short term investments that are uncorrelated or less correlated to the US stock exchange to help reduce or hedge the downside during sell offs. I continue to be cautiously optimistic in the markets and think that the sell offs have been exaggerated. I believe that in a period of slowing growth, growth stocks will continue to outperform value stocks. I am still mostly invested in the US which provides plenty of opportunity and more stability. As for fixed income, I am still using investments that have less interest rate risk as I am not willing to take a lot more risk for a little more yield.
I continue to evaluate my clients’ investments to help make sure they are in line with their objectives, risk tolerance and time horizon.
Finally, for anyone that needs to put money into an IRA or Roth, remember April 15 is the deadline for 2018.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be used as a primary basis for investment decisions and should not be construed as advice meeting the particular investment needs of any investor. The information presented does not constitute a solicitation for the purchase or sale of any security. When considering the performance the US market performance, we considered the S&P 500. The S&P 500 is an unmanaged index and cannot be directly invested into. Investing involves risk and the potential to lose principal. Past performance does not guarantee future results. LPL Financial does not offer tax advice.
05/19
Jordan Kerner
Financial Advisor, Waddell & Reed, Inc.
Office: 475-619-2240 | Cell: 917-301-7274 | Fax: 203-557-6262
www.jordankerner.wrfa.com | jkerner@wradvisors.com
495 Post Rd E Ste 209| Westport, CT 06880