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Q1 2018 Market Brief
First Quarter Market Brief Below – Full Market Update and Outlook Available to Clients
The first quarter has been a change from the market we grew accustomed to in 2016 and 2017. Notably the market has been slightly negative as of this writing, and the journey to get to that point has been anything but smooth. On top of recent volatility we have significant changes from Congress and the White House that could also affect the economic outlook. With these developments throughout the first quarter, we think it prudent to take action within our own client portfolios to manage risk positions.
We spoke in our last update about tax-reform acting as a potential near-term tailwind for the stock market, and in January that was absolutely the case as the market rose sharply. However, as we mentioned was possible in our New Year outlook a sudden jump in interest rates, caused a market correction of nearly 12% from the previous highs in early February. Not only did that erase January’s gains, but it sent tremors that are still causing volatility today, namely due to concern over looming economic headwinds. This could be a sign that allocations need revisiting and adjustment.
As the economy continues to produce record low unemployment numbers, the result is that wage and inflation pressures can and likely will eventually ensue. Inflation, and higher interest rates can be headwinds for the stock market. After 9 years of “easy” monetary policy in the form of low rates fostering an environment for asset and economic growth, we have now begun down a path of “tightening” economic conditions which can stem growth in the economy and potentially stocks. This has left investors towards the end of the quarter feeling concerned that the long economic growth environment may finally be rolling over. You can combine that environment with continuing rhetoric from our nations capitol that while regular, doesn’t’t help alleviate any concerns over an economic slowdown. Things like tariff’s and friction in global trade would likely act as a headwind for economic growth, and there is quite a bit of uncertainty around how final negotiations will shake out.
In short, we view the current environment as one in which taking excess risk may result in a lousy payoff. Investors over the last 12 months in the absence of volatility have increased risk positions and may be unprepared for severe bouts of volatility or a major correction. We are taking action in our client’s portfolios to position for significant market volatility as we continue to see economic and market risks build. We would recommend investors examine their allocation to ensure their strategy is aligned with their goals.
This economic updated was written and edited by Robert Jeter, CFP ®, CRPC® and Eric Johnston, CFP®, AIF® of InFocus Financial Advisors, Inc.
The views are those of Robert Jeter CFP ®, CRPC® and Eric Johnston CFP®, AIF® and should not be construed as specific investment advise. Investors cannot directly invest in indices. Past performance is not a guarantee of future results. Securities and advisory serviced offered through Cetera Advisors LLC, member FINRA/SIPC. Cetera is under separate ownership from any other named entity.