3rd Quarter 2019 Commentary
· The US-China trade dispute has dominated the headlines and volatility for this quarter. The Federal Reserve’s stance on interest rates gets a distant second. The gist of the ambiguity for stocks is slower global growth and tariff wars. Brexit is also very much in the background.
· The Federal Reserve cut rates twice, and the ECB announced new strategies to stimulate the economy. US stocks achieved fairly small gains and pressures were felt in the commodity and financial sectors.
· The Trump impeachment doesn’t help the macro view of the solidarity of the United States. In particular, China seems to want to see if “waiting Trump out” is a possibility, although talks are resuming.
· Bond yields have declined precipitously over the quarter due to heightened global risk aversion.
Our message is that we will conservatively take gains going into the fourth quarter and be satisfied with holding moderate amounts of cash. While there is this sense that so many things are awry, the truth is more to the contrary. The US has low unemployment, and growth is still placing GDP near 2%. The world is saying that we are going to have a recession in 2020. As you know, we don’t make those types of prognostications and believe a broken clock is right twice a day. That having been said, yes, things are in a slower growth mode than in the past few years. We believe that after 10 years of a bull market, we are bound to have some pullbacks. No market in our lifetime has ever been monodirectional, but we wouldn’t want our clients wasting their time trying to guess the top. Instead, we will pave the year end path with some realized gains and cash so that we live to fight another day.