'Tis The Season For Volatility
Since the market correction memo we distributed in October, we have experienced a bit of calm and a resurgence of volatility.
The short-lived holiday rally stemmed largely from the G-20 Summit where President Trump promised to delay additional Chinese tariffs to provide more time for negotiations between the two countries. This relatively peaceful market interlude was interrupted by the arrest of the CFO of Huawei in Canada on the direction of U.S. authorities.
Huawei is a Chinese corporate champion in the critical 5G telecom space, and this is an industry both China and America desire to dominate.
In Europe, we have a slowing overall economy, riots in Paris, Italian budget concerns, and a still unresolved Brexit negotiation. All of this continues to weigh on international developed markets. For more on this, our research consultant FEG just penned a new FEG Insight: BREXIT - A Certainty of Uncertainty
On top of these developments, the U.S. yield curve continues to flatten, and parts of the belly of the curve have even inverted. This indicates market participants view the U.S. Federal Reserve's efforts to raise interest rates as increasingly difficult. Indeed, there is speculation the Fed may even have to reduce rates in a few years due to a slowing economy.
All of this sets the stage for an interesting 2019.
As a counter to all of the previously mentioned negatives, we still have a robust economy that has benefited from corporate tax cuts and a pro-growth administration that is deeply interested in keeping the economy and stock market going to fuel the president's bid for a second term.
Legacy Trust will address these opposing forces in our upcoming first quarter meetings.
In the meantime, we point readers to links in this email, including this past educational presentation Volatility Amid Taxes & Tariffs.
Last but not least, it is important to remember that while initially concerning, periods of volatility can be beneficial for patient investors. Market stress provides occasions to rebalance into areas of opportunity, providing capital to areas where capital is scarce and return potential is most significant. Legacy continues to believe investors are best served by avoiding reactionary-decisions to short-term market moves, adhering to their investment plans, and maintaining diversified portfolios. As always, Legacy will remain vigilant in monitoring the market situation and will take appropriate actions for each client's unique situation, if warranted.
We wish everyone Happy Holidays and a Prosperous New Year.
Legacy Trust Family Wealth Office's Investment Committee:
Kristin McLauchlan, Chairman
Marty Flack, Director
Chord McLaughlin, CFA, Associate Director
Kristi Quick, Member
Holly Tyrrell, Member
James Tronti, Member