Staying the Course and Enjoying the Ride
The third quarter proved to be good for most U.S. equities, and investors welcomed a more gentle summer. Gradually increasing U.S. interest rates are tightening financial conditions around the world. The Fed has indicated that they will be raising rates for the foreseeable future, and this will lend itself to a stronger U.S. dollar. All this having been said, we believe that the markets will push through decent returns in equities through the remainder of 2018.
We believe as we move into the fourth quarter of this year, it is okay to take some capital gains. Politics will be changing our footing with the midterm elections, and we always have the risks of the emerging markets or another country’s currency ills resounding through our markets. This is all to simply say that it is getting later in the game, and we expect volatility and probability of market corrections to increase.
The underpinnings of U.S. growth are still strong with the tax cuts and low unemployment, and we still prefer the U.S. to other markets. Now is a good time to check our portfolio resilience and be comfortable with our weightings in regard to risk tolerances. Finally, we think year end should provide a good atmosphere for retailers and the holidays, and we see a reasonable fourth quarter ahead. This is a good time to stick to our investment plan, take some gains, and stay in short maturities in our fixed income.