Almost Mid-Year Thoughts
June 4, 2018
By Mike Moreland
Vice President of Investment Services
The stock market is a discounting mechanism, always forward-looking – at least according to efficient market theorists. All that is known is already reflected in market prices. It’s the uncertainty ahead that creates risk and opportunity.
We’ve seen an uptick in volatility in the first half of 2018, at least by recent standards. A good part of this is due to diverging paths taken by major economies. Over the last few years, Goldman Sachs characterized world conditions as a ‘synchronized global expansion’ and, in less academic terms, a ‘Goldilocks’ environment. No clouds were on the horizon.
This narrative is changing, at least in the big picture. The unified global expansion is no more, for now. See the chart below from the Wall Street Journal’s Daily Shot.
If global growth is moderating – or worse – rolling over, will the equity markets lead the way? End-of-cycle fears are growing. Concern over what happens next is contributing to this higher volatility, a trend that will likely continue.
At SNB Wealth Management, we are not in the recession-is-around-the-corner camp. We’re clearly in the later stages of the economic cycle, but we fully believe reasonable global growth is achievable and probable over the next year or more. The markets, on the other hand, will need convincing. An old line about Wall Street is that, ‘the stock market has successfully predicted seven of the last three recessions’. Some things will never change.
We remain optimistic for global economies and, by implication, the financial markets. At the same time we always ask, ‘what if we’re wrong?’ We are fully invested, but conservatively so. Portfolios under our direction are broadly diversified, with a tilt toward high quality and a value orientation. We can’t eliminate the risk from a portfolio, but we can work to minimize its impact and lend predictability to expected returns. Contact us today, to see how we can help you.
In the meantime, go enjoy a night with the Sioux City Explorers at Lewis & Clark Park. There’s no better way to spend an early summer evening than with the league-leading X’s!