Finally, we are observing volatility in the market, something we have talked about and anticipated for quite some time. It is a natural part of the capital markets movement but hasn’t shown up for years. The reason behind this week’s weakness is a US economy that is adding more jobs than anticipated, along with wage pressure that has been absent for over a decade.
Why would the market move downward when this seems like good news to the overall health of the economy? If interest rates move at a faster pace upward than anticipated, it could lead to more Fed interest rate tightening leading to slower growth of the equity market. To put the pullback of this week in perspective, we are now at the same trading levels in the Dow and S&P 500 that we were on January 11th of this year… yes, only 3 weeks ago. Friday, the headlines read hyperbole
We have been actively taking a more defensive posture over the last few months, and are positioned to take advantage of a further correction if we continue to see weakness. We have included a piece from LPL highlighting some of the amazing streaks that have taken place, listing a few of the reasons why we should anticipate a pickup in volatility, and explain how any possible weakness can provide investors with an opportunity in diversified portfolios. Click the link below to read the article from LPL research.
-Jay
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.