(315) 624-7300 / Email Us
Ascent Wealth Partners
  • Home
  • Investing
  • Planning
  • 401(k)
  • Knowledge
  • Team
    • Brad Kowalczyk
    • Mark Moshier
    • Scott McCartney
    • Doug Bissonette
    • Neil Edmonds
    • Joe Summa
    • Nancy Kowalczyk
    • Chris Lai
    • Tim Welchons
    • Steve Basile
    • Connie Benson
  • My Account
    • Fidelity Login
  • Contact Us
  • Form-CRS
Ascent Wealth Partners
  • Home
  • Investing
  • Planning
  • 401(k)
  • Knowledge
  • Team
    • Brad Kowalczyk
    • Mark Moshier
    • Scott McCartney
    • Doug Bissonette
    • Neil Edmonds
    • Joe Summa
    • Nancy Kowalczyk
    • Chris Lai
    • Tim Welchons
    • Steve Basile
    • Connie Benson
  • My Account
    • Fidelity Login
  • Contact Us
  • Form-CRS
Home Chris Lai The Stock Market Corrects
Back Home

The Stock Market Corrects

byAscentadmin inChris Lai, Scott McCartney posted onNovember 27, 2018
0
0
The Stock Market Corrects

In our last commentary on the market in mid-October (“Volatility Returns”), we noted the swift pullback in stock prices that had begun two weeks prior. The downward pressure on prices has continued, and we find ourselves firmly in a stock market correction, defined as the market being off 10% or more from recent highs. As we write, the US market is hovering at break-even levels for 2018. Overseas markets are almost uniformly lower for the year.

The near-term economic outlook of investors has degraded; stocks are telling us that. The trade tiff with China appears nowhere close to getting better, putting both countries under self-inflicted economic stress. The 10% tariffs on Chinese imports is set to increase to 25% after January 1, assuming no breakthroughs. In the short term, that’ll be a profit dampener to affected companies. Longer term, tariffs will get passed through to consumer prices.

Technology stocks, and high-beta stocks generally, are in a sustained selloff mode. Apple has shocked investors with order cuts to its suppliers, suggesting a slowdown in the smartphone market, and the stock has headed steadily lower. There is a new round of regulatory worries hanging over companies like Facebook and possibly Google. In addition, some of the selloff feels like year-end technical action (e.g., investors protecting what are still gains). At present, investors continue to sell technology, but we think shares will find their bottom soon.

Capital spending is a growth driver, and was expected to increase following the corporate tax cuts, but we have yet to see a sustained pickup. Within the consumer economy, despite strong jobs data, housing is in a downturn, with higher rates the main culprit, and the new limits on local and state tax deductibility hitting real estate values. Auto sales are likely plateaued, at best. The ripple effects from housing and autos are decently big, and the uneven action in those sectors represent another headwind for the economy.

Among the world’s major economies, China is slowing, due partly to trade issues, and Japan and Germany both printed negative third-quarter economic growth. US numbers are likely artificially high. In the year’s first half, there was a “buy ahead” from companies hoping to mitigate increased tariff costs. So, business inventories are elevated, and that will need to burn off in future quarters. For purposes of measuring economic growth, inventory builds (now in the past) are positive contributors, and drawdowns are negative contributors.

In sum, what began as a growth scare from higher rates and China trade has developed into a more significant market event, as price drives the narrative. As we have noted previously, this isn’t a systemic event, with markets falling apart on panicked conditions; we don’t expect that to be the case, either. But it’s clear that stocks are trying to find a footing at lower levels.

There are a few bright spots: the Fed (ironically enough), and valuation. The Fed is expected to move in December with a rate hike, but the increased betting is for some dovish language that softens the central bank’s prior hard-rate stance. Valuation overall on the S&P 500 is about 17x current earnings, and roughly 15x forward (i.e., considering 2019 earnings estimates), assuming some profit growth.

It is premature to call the end of the current economic expansion, and we continue to monitor and navigate the investment markets on your behalf.

Scott C. McCartney, CFA Partner and Chief Investment Officer Christopher Lai, CFA Senior Portfolio Manager

Share:

Previous

Market Currents - 11/1/18

Next

Market Currents- 12/03/2018

Related Posts

Market Currents- 08/23/2016
August 23, 2016
Market Currents- 08/23/2016
No Comments
Tumultuous Trump
February 24, 2017
Tumultuous Trump
No Comments
Market Currents- 07/30/2015
July 30, 2015
Market Currents- 07/30/2015
No Comments

Leave a Comment Cancel reply

Your email address will not be published. Required fields are marked *

Archives

  • January 2021
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • October 2017
  • September 2017
  • July 2017
  • May 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • August 2016
  • July 2016
  • June 2016
  • April 2016
  • February 2016
  • January 2016
  • November 2015
  • September 2015
  • July 2015
  • January 2015
  • November 2014
  • September 2014
  • May 2014
  • October 2013
  • June 2013
  • November 2012
  • May 2012
  • March 2012

Recent Posts

  • David versus Goliath
  • Market Currents – 1/25/21
  • Giving Thanks and Feeling Hope

Contact Us

  • Address
    NEW HARTFORD: 89 Genesee Street | New Hartford, NY 13413 | 315.624.7300

    ELMIRA: 1225 W. Water Street, Suite 1 | Elmira, NY 14905 | 607.734.2002

    SARATOGA: 16 Lake Avenue | Saratoga Springs, NY 12866 | 518.306.4220
  • Home
  • Investing
  • Planning
  • 401(k)
  • Team
  • Contact Us
  • Terms of use

Recent Posts

  • David versus Goliath January 29, 2021
  • Market Currents – 1/25/21 January 25, 2021
  • Giving Thanks and Feeling Hope November 25, 2020
  • Market Currents- 11/13/2020 November 13, 2020

Login To Your Fidelity Account

Copyright © 2021 Ascent Wealth Partners. All Rights Reserved.