(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
    • Schwab 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
    • Schwab Login
  • Contact Us
  • Form-CRS
Home Chris Lai Volatility Returns
Back Home

Volatility Returns

byAscentadmin inChris Lai, Scott McCartney posted onOctober 12, 2018
0
0
Volatility Returns

Rising interest rates, and trade tensions between U.S. and China, are the prime drivers of market softness
● The current pullback is confined mostly to stocks; we are not seeing stresses in other asset markets, especially credit
● The near-term future looks less predictable, and volatility is likely to remain elevated, but we don’t foresee weakness to be dire or systemic

The stock market has weakened steadily as October has gotten under way, falling some 5% from its all-time high seen just a week ago. While the size, so far, of the pullback remains modest, its swiftness has caused investors to sit up and take notice.

There are a few culprits for the weak action. Foremost is the continuing rise in rates, both in the short end (Fed hikes), and the longer end (market-derived). Yields on long-term U.S. government debt moved quickly higher last week, and higher rates pose competition for stocks as investments. Second, the U.S. and China remain locked in a growing trade war that has seen them level increasingly severe rounds of tariffs on each other’s imports. At present, the wrangling over trade and related issues between the two countries shows no sign of getting better.

Even though the near-term future looks less certain, there are still reasons for optimism. Interest rates are moving higher largely on “good” reasons (strong economic growth) as opposed to “bad” ones (spiking inflation and/or a hawkish swing in monetary policy). In prior cycles of interest-rate increases, a 5% yield on the 10-year was a typical yield level for bonds to be stoutly competitive with equities. A similar inflection point today is likely at a lower rate level, perhaps 4%. We believe the market should be able to withstand interest rate competition at levels higher than current.

We are currently on the cusp of third-quarter earnings releases, which should help investors assess business fundamentals. Forecasters expect yet another solid showing this season, helped by corporate tax cuts and higher consumer spending. Operating margins remain high, even with cost pressures ramping up on rising labor costs. We are seeing healthy revenue growth across companies, as well.

The last correction took place earlier this year, in February, following a frothy January combined with fears of a slowing economic outlook. Slowdown fears proved to be unfounded, and the correction turned out to be a buying opportunity for investors who stayed the course. It is impossible to predict the movement of short-term prices. We expect volatility – both to the downside and up – to remain present for a while, and the damage inflicted on investor psychology will take some time to heal. Corrective action in stocks almost always “feels” bad, and it is normal to expect if worse conditions await the investor. Importantly however, the correction has been largely confined to stocks. We are not seeing stresses spreading to other asset markets, most significantly the credit markets. The present pullback has brought the market’s valuation closer to long-term averages. Sentiment can evolve rapidly, but we don’t believe the action at present suggests anything especially dire or systemic, and we remain cautiously optimistic.

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

Share:

Previous

Market Currents - 10/1/18

Next

Market Currents - 11/1/18

Related Posts

Strategizing For 2023
January 6, 2023
Strategizing For 2023
No Comments
Market Currents – 4/9/19
April 9, 2019
Market Currents – 4/9/19
No Comments
Market Currents 9/9/19
September 9, 2019
Market Currents 9/9/19
No Comments

Leave a Comment Cancel reply

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

Archives

  • March 2023
  • February 2023
  • January 2023
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • 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

  • What Is Your Cash Doing For You?
  • Market Currents – 2/7/23
  • Market Currents – 1/12/23

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

  • What Is Your Cash Doing For You? March 7, 2023
  • Market Currents – 2/7/23 February 7, 2023
  • Market Currents – 1/12/23 January 12, 2023
  • Strategizing For 2023 January 6, 2023

Login To Your Schwab Account

Copyright © 2023 Ascent Wealth Partners. All Rights Reserved.