INVESTMENT STRATEGY
As we say goodbye to Summer and move into Fall, it is time to start looking forward to Halloween. Soon children of all ages will don their favorite costumes and head to their neighbor’s to ask the age old question, “trick or treat?” As we survey the status of the global economy, we find investors are asking similar questions.
October is long-renowned for stock market air pockets. So, with the major market indices already down over 7% in the past three weeks, should you be frightened? Here are three things to consider:
1. Global Goblins
For international markets, weaker economic trends coupled with escalating U.S – China trade disputes, Iran sanctions, and ongoing Brexit negotiations are generating noticeable investment return divergences. Further, the strength of the U.S. Dollar is not only making a mess for most global markets, it’s also wreaking havoc on smaller, emerging market countries. Bottom line, international markets look like they are going to be the goblins to avoid for the rest of the year.
2. Rising from the Dead
Awakened by the Federal Reserve and inflationary pressures, interest rates are rising across the board. As a result, rate-sensitive investments continue to struggle and home affordability is softening. These rising rates may very well be the candy corn, voted #1 worst Halloween candy, of your investment portfolio if you don’t handpick your candy wisely.
3. Safe Treats
Typically, as the economy begins to slow down, consumers generally spend less on “things they want” and focus more on the “things they need.” As this trend emerges, the returns of the corresponding categories of stocks usually follow suit. Recently, the “safe” or “defensive” themes have started to unveil themselves as the difference between cyclical (technology, discretionary) and non-cyclical (staples, healthcare) sector returns has started to flip in favor of owning the “safe” treats this season.
Our Outlook: BEARISH
We continue to maintain a negative outlook for the remainder of the year as economic growth is projected to cool, creating a scary environment for stocks. While we do not currently observe recessionary conditions, we still favor maintaining lower levels of investment risk and preparing your portfolio for a potentially more frightening climate over the next two quarters.
How Can We Help?
At GGM, aligning your investments with the prevailing economic environment is just one of the ways we strive to add value to your portfolio. If you are concerned about whether your investments are prepared for what’s ahead, we recommend our complimentary portfolio checkup. Contact us today!
