PSM Quarterly Investment Report Quarter 4 2018
…in 2018? 2017 was so smooth! The market regularly rose in value and there was practically no volatility. In fact, the stock market has had a remarkable upward bias since 2009. That’s how it should be. Isn’t it? The answer is “nope”.
It is very unusual to have such a steady and long run upward trend. (Actually, the current bull market may achieve being the longest bull market in U.S. history.) The historical record for the stock market shows many ups and downs with volatility being a normal part of the process.
Is it because a recession is looming? Recession is all about fundamentals: Is unemployment high? Are interest rates out of control? Are corporations losing money? The answer to all of those questions are “nope”. We have one of the lowest unemployment rates in history and it may fall even further. Interest rates are at historic lows and being carefully raised as the economy has strengthened (maybe one or two more hikes in 2019). American corporations are profitable and optimistic. So why the increased volatility?
The fourth quarter of the year is typically a “low volume” trading period. People are focused on the holidays and closing out their year. However, institutional traders who use computers to place trades are very active. The computers act based on movements in the market and when there is a market shock, they kick in. They kicked in. Big time. The individual investor sees that, thinks there is a problem and begins to sell as well. Before you know it, we have big bumps. Then you have to add in a trade war with China, civil unrest in France, a U.S. government shut down and an administration trying to find a way to interfere in the Federal Reserve – and you have volatility.
What do we do now? What the experienced investor has always done. Keep our eye on the long term, be sure we own quality investments, be sure we are diversified and be sure our structure suits our goals. It’s really that simple. With that in mind, we’ve been hard at work monitoring the portfolios, making slight changes in balance where needed, shortening the duration of the bonds and making sure our cash positions are sufficient.
Hang in there! Call us if you need to discuss the environment and know that we understand the frustration but have experience and history to guide us.
--Janet Pearce, CIMA®, MBA , Chief Investment Officer
-The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC (Kestra IS) The material is for informational purposes only. It 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. It is not guaranteed by Kestra IS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.