Volatility continues to take the headlines; with a focus on trade, economic slowdown, oil prices and interest rates. The market is not a fan of confusion and there is enough of it out there in the global markets to keep this chop alive. We are favoring high quality, dividend paying companies and are making a modest change in our bond positions away from credit risk. Consistent income generating securities can create a buffer in volatile markets by continuing to produce income regardless of the movement of the market.
As we cancel out the noise, the domestic economy has plenty of reasons to rally. The U.S. is experiencing high GDP growth, low unemployment levels, great corporate earnings, strong consumer confidence levels and interest rate hikes that look to be slowing in 2019. We want to keep a balanced approach to the portfolio allocation and take advantage of opportunities in investments that are getting oversold. Historically, recessions do not occur when US corporate profits are growing. We see the recent market downturn as a market correction that provides an opportunity rather than one that we should fear. Before acting on this opportunity, we would like to see a consistent geopolitical message on trade allowing for a more sustainable market rally.
Included in the media noise is lot of chatter about the inversion of the yield curve. In the 25 years of managing investments, I have never heard more talk about the ‘yield curve’ and the potential for inversion. We have added some color on that topic with the attached blog post from our partners at Alliance Bernstein. The US Yield Curve Inverted. Time to Worry?
Have a wonderful weekend!