Critical Market Brief
For this week’s market update, I am going to keep this brief. I have written extensively about what is going over the last few weeks, so please refer to those recent newsletters for more information.
What’s going here is that the economy is transitioning from a low and declining interest rate environment to a rising interest rate environment. We have known this for some time, but the language that the Federal Reserve has been using is dumbfounding.
They laid out a plan that they were going to raise rates at set times in the future regardless of the economic condition. That’s just asinine. It’s like telling your enemy what day you’re going to attack and from what direction.
They meet this week on the 18 or 19th. I think their hands are tied and that they have to raise rates to keep looking independent. However, the language they use to describe the future is paramount. I expect them to get away from set rate rises to a “wait and see” situation where they react if and when necessary.
Of course the China trade deal is a concern, and I expect that to be resolved shortly.
If we get either or both of these, I believe things will look a whole lot better…provided the President’s tweet doesn’t say something that would diminish the positives.
Interestingly, the S&P 500 is holding up better than most of the other indexes, down about 10% over the last few months. The Nasdaq is down -13%, Russell 2000 -15% and global markets down even more. Naturally, we all want a diversified portfolio so there has been no place to hide.
For now, no action needs to be taken. We are watching things very closely. I don’t believe you successfully trade this volatility and selling here could be a tremendous mistake. This still appears to be a normal and necessary, albeit painful correction. Don’t let it get to you, especially during this holiday season.