Message from Jon
The markets began last week with the promise of a positive show given the "trade war truce" that unfolded between the US and China over the previous weekend. They quickly changed their mind since the truce was only verbal and not in writing, leading one to believe that this too was only temporary in nature and not a lasting fix.5
Couple this major event cycle with the whole Brexit/No-Brexit deal that has since turned out to be a No Deal, and we have quite the exciting (not for the better) set of circumstances that gave the markets plenty of reason for pause and concerns.6
There are plenty of economists on both sides of the recession's looming debate at present, but over the weekend's reading, I came across a couple neat little charts that surmised the recession concerns quite nicely. They show why, at this point, the concerns over a recession should not be present, and therefore, what is left is that we are embracing yet another market correction!
Many are concerned about a recession because of the inverted yield curve that is a predictor of a recession. An inverted Yield Curve happens when the short-term bonds out-perform longer term bonds. This occurrence is used as a predictor of recessions and has a 100% rate of doing so-but here is where the fine print comes in. It is only 100% accurate when considering the 2-yr and 10-yr Treasury Yields. This past Monday the 3rd, the yield curve was inverted when considering the 2, 3, & 5-yr Treasuries but not the 10 yr. Now, this is not necessarily good, but it is ALSO NOT a bad omen out of hand either since, like anything these days, it can slow, reverse, or continue, and at this point, we will have to wait and see.3
As of Friday last week though, the markets once again entered into negative territory for the year, making it the 2nd time such outcomes have occurred. This means nothing except to inform those of you that still think the markets are at their highs and all is well in the kingdom.
We will continue to look for opportunities to buy down and keep our eye to the horizon for anything more hazardous that requires our attentions.
- Stormguard: -1.54% up from the low of -1.85% in Oct.
- D/W: Dom Eq, Int'l Eq, Comm, Fixed Income, Cash, Currency
So, like it or not, we are still seeing indications that being cautious is good, but remaining invested is the main course even after the weeks of chaos and volatility we have seen!
Till we speak again, enjoy the week!
WEEKLY UPDATE - DECEMBER 10, 2018