(Reactive) Wolves in (Responsible) Sheep’s Clothing
Investor Insights, April 6th, 2018
Five Things You Should Know
- Equity Markets – faced a challenging week with both a tough start and finish bookending three strong days. The S&P 500 finished down 1.38%, while international markets (EFA) faired a little better down just 0.40%.
- Fixed Income Markets – were pretty flat with high-quality bonds (AGG) down just 0.09% and high-yield bonds up 0.11%.
- U.S./China Trade Tensions – this week certainly was a see-saw one which started with increased tariffs from China and market declines, only to see both sides come out with conciliatory language causing markets to rally sharply for three days, and ended with President Trump announcing new possible tariffs, and suggesting investors might face “a little pain” which caused markets to decline again on Friday. Our best advice for now is to not burn out emotionally reading too much into either positive or negative headlines. As the WSJ reported this week, both sides "will now follow a timeline stretching over the next half year, during which the two sides will seek to negotiate a new normal."
- Fed Chairman Jerome Powell – in his first speech since taking over as Fed Chair, Powell disappointed markets with his outlook that the economy is still strong and that more interest rate hikes are still planned for. At this point, trying to front run the Fed seems premature as monetary policy is still loose even with a few more rates hikes.
- Key Insight – Far too many investors rely on a “process” that essentially boils down to trying to “make a call”; a reality that is seemingly still a part of the big national firms “process” as well. As I’ve said before, a sound process does not rely on predictions and prognostications but rather designing a strategy that works through the inevitable unevenness of markets before volatility sets in. People telling investors to sell now aren’t being responsible, just reactive.
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