Our view on the financial markets


A lot has changed since our last market update in January. There has been a threat of a trade war with China, market volatility spiked in January and re-emerged in April, and the equity markets took a 10% hit in the 1st quarter of the year. Should you be concerned about your investment portfolio?

We believe the market correction was overdue.
When viewed within a historical context, a ten percent correction is not out of the norm. We would expect to see one 10% correction and two or three 5% corrections in a given year, so we believe this market adjustment is not a cause for concern.

Leading indicators suggest the economy will continue to grow.
The economy has been averaging 3% annualized growth over the last three quarters, a healthy margin above the longer-term trend of 2.2%. But will this growth continue? We believe recent data supports a positive outlook and foresee growth continuing in 2018 for several reasons, including:

  • Consumer confidence is at an all-time high – Unemployment is low and is continuing to decline, we’re beginning to see some of the benefits of the tax cuts passed last year, and consumers appear to be happy and spending money. These factors are all indicative of continued growth.
  • The Trucker’s Survey suggests the economy is improving – Warren Buffet follows the Trucker’s Survey because it has the highest correlation to GDP (Gross Domestic Product) growth, and the survey points to solid growth in the coming months.

Despite potential risks, we remain cautiously optimistic.
There are several factors that could potentially derail the economy going forward. We would be concerned if inflation picks up quicker than we anticipate or becomes a bigger issue in the next few months. If the Federal Reserve starts to tighten rates faster than the market projects, it may cause the markets to panic.. Finally, trade wars are generally not beneficial to any country, so if the rhetoric continues it may create downside risk. Our view is that these things are all possible, albeit with a lower probability, and as a firm we remain overweight in equities.


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