Before getting to the travel-filled eating frenzy that we Americans call the Holiday Season, let’s talk about this past week’s stock market action.
If you paid little attention the last few days, you missed little.
Last week started in similar price ranges for US indexes as they ended. If you hold a globally diversified portfolio and you are just looking at your account numbers, there quite likely was little or no change to your nest egg. However, if you happened to set CNBC on repeat on your preferred internet device starting 11/12/18, you may have become a little stressed out.
For the record, we really hope no one reading this has been tied to CNBC, Bloomberg or Fox Business the last several days. If you were, we should probably talk about your time management.
Feel free to book an appointment and we will put together a plan to get you back on track to fiscal sanity.– Michael Menzies, #MyFinancialFriend
So what happened last week and where are we now?
First, a really short history lesson. A few days ago, we made it through what was appropriately dubbed by Mel Faber as “Red October”.
October brought the return to historically normal volatility in US markets. In addition, fears of trade wars were amped up and global central banks continued to raise rates. Central banks continued to unload debt from their balance sheets. We’ve also had a lot of bantering between government leaders. Fun times, right?
Economists continued to let everyone know that unless we can get our global debt issues under control, some “bad stuff” will eventually arrive in the debt markets. This bad stuff probably will set us up for a recession and market pain. To add “insult to injury”, it is becoming clear that the US housing market has cooled off with the Winter temps. Winter is coming, wages are rising and companies are saying both will pressure their company bottom lines.
Finally, just to bum everyone out, it is “late” in the economic cycle and Price to Earnings (PE) ratio are stretched by historical standards in the US.
Now, here we are in November! The midterm election is behind us and the holiday season is upon us. Several of the scariest issues for markets are also behind us – Halloween, back to school, and the passing of a North American trade bill, to name a few.
On to more market positives.
The upcoming season of spending (the last 6-8 weeks of the year) tends to be a season of market rise. The US economy is in good shape by many metrics. Companies are making money, and consumers are spending money. These items tend to increase earnings and balance and soften US PE ratios. With a more diverse US government, at least in the short term, the massive piling on of discretionary debt has a chance of begin slowed down.
On to even better good news.
The US is not the only market in the world (although we do tend to act like it at times #homecountrybias). US markets make up about 20-25% of the investable markets. With a global market portfolio and a solid financial plan, US centric problems should typically be viewed as noise for most business owners and investors. In fact, as the US markets were falling last week, non-US markets have been flat or better than flat. It may come as a surprise to some (namely those who were glued to the financial news of late) that China and India have been trending up during the US down days. So, the actual impact on a well built global market portfolio has been really boring. Nothing happened.
As readers of our blogs might imagine, my message in times of volatility (be it a week, 6 months or more) is keep calm, be happy, and reach out if you have financial questions or concerns.-Michael Menzies, #MyFinancialFriend
At this time of year I will add to those recommendations: enjoy the holidays and let me know when you are free to grab some eggnog.
I’m even happy to buy the first round (limit one per customer, taxes, fees and tip not included!) 🙂