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Steve's Newsletter

Steve's October 2019 Newsletter

Hitting a Ceiling or Building a Floor!

United States stocks have failed to move above their all time highs. If you cut thru all the volatility and angst in the economy and ongoing political soap opera, the Dow and S&P 500 Indexes are basically back where they were 20 months ago in January 2018 when the first round of United States and China trade tariffs were announced.

Economic data has recently been mixed, and leading economic indicators have not confirmed the recent strength in the stock markets. However, unemployment last month was the lowest in 50 years!

World manufacturing weakness, unclear monetary policy and the consistent negative tone of political discord is starting to affect United States consumer and business confidence and sending an ominous signal to world economies. Investment risks never completely abate; however the United States is one of the few shining spots in the economic world!

I have said this before; it is the consumer (you and me continuing to buy more stuff) along with company stock buyback of shares that has kept the markets buoyant for the last decade. Our gross domestic product (GDP) growth is less manufacturing driven and more service/consumer driven then in the past. If the weakening confidence of business leaders leads to a deteriorating job market (layoffs), it could spill over into weaker consumer confidence. Negative news can be a self-fulfilling prophecy. When businesses are uncertain about the future, they will pull back and wait!

Financial markets and analysts have been flipping quickly between risk-on and risk-off. I read and input so much financial information that it's sometimes like watching a huge flock of birds in the sky all of a sudden switch direction in tandem, without good reason.

Despite the concerns, I don’t see signs of an "imminent" recession, but I also don’t see signs of a sharp breakout to the upside either. The United States seems to be the best in a mediocre economic world.

Investing and worrying about short term news; negative interest rates, oil field attacks, Hong Kong protests, impeachment, inverted yield curves, trade, recession, etc. will always be a dangerous mix.

My job is to build a long term strategic view that takes into account our clients individual personal factors, time horizon and risk tolerance and build a portfolio that looks ahead with re-balancing, years or decades, not weeks or a few months!

So far, 2019 has been a good year for Newmarket Advisors, Inc. clients. It is a great time to be grateful, happy and focused on the upcoming holidays, family, and friends.  

Regards,

Steve Newman