Fasten your seatbelt; U.S. markets may be volatile
It would be an understatement to say that 2018 was a volatile year in the equity markets, and we saw two declines of over 10% in the S&P 500. The more recent, in December, was a drop of 19.8%, nearing the definition of a bear market, which is 20% or more. Despite our anticipation that volatility will continue in 2019, we expect to see positive returns in the equity markets in 2019. History is on our side, and indicators suggest that U.S. companies will have positive earnings this year.
As we continue to monitor the financial markets and client portfolios, some of the issues on the horizon we will be paying close attention to, include:
- Brexit. On Thursday, June 23, 2016, the United Kingdom (UK) held a public referendum asking voters whether the U.K. should remain in or leave the European Union (EU). “Leave” won 52% to 48% which started the process of negotiations with the EU on a withdrawal deal. In January 2019, Members of Parliament (MPs) overwhelmingly rejected the proposed withdrawal agreement. There is a March 29, 2019 deadline for the U.K. to leave the EU, and there is a question as to whether that deadline will be extended. We believe a hard exit would be disruptive to the equity markets going forward.
- Trade deadline with China. U.S. President Donald Trump and China’s President Xi Jinping set a March 1, 2019 deadline to agree to a trade deal. Even if there is not a deal by this date, we expect that if some type of progress is made, there could be a positive outcome for the markets.
- Budget and debt ceiling. The government shutdown, funding for the 2019 fiscal year budget and the upcoming March 1 reinstatement of the debt ceiling are all factors that could create a headwind for the financial markets.
At Luma Wealth, our philosophy is to remain focused on the long term. If you have questions about how these or other factors may affect your investment portfolio, please contact your Luma Wealth advisor.