3 factors that can affect your investment strategy

By Luma Wealth on May 7, 2019


The Yield Curve Inverted. Don’t Panic.


You may have heard that the U.S. Treasury yield curve inverted on March 22nd, for the first time since 2007, and wondered what this might mean for your investment strategy.

An inverted yield curve occurs when the interest paid on (shorter-term) 3-month Treasury bills is higher than the interest paid on (longer-term) 10-year Treasury bonds. It can signify that those who lend money anticipate lower economic growth ahead – but it’s only one market indicator.

When developing our investment outlook, we consider several factors, including:

1. The spread of the yield curve. While an inverted yield curve has, historically, been considered a predictor of economic recession, not all inverted yield curves have led to one. There have been two out of 11 inversions since the 1960s in which an economic recession did not follow, in 1966 and 1998. It’s likely that current conditions most resemble the 1966 inversion.

2. Economic growth. The employment picture appears healthy, with 263,000 jobs added in April and jobless claims on the decline. Corporate bond spreads have been steady to declining, which is also seen as a positive sign for the economy. In addition, the Evercore ISI Truckers Survey (an indicator highly correlated with GDP growth) has ticked higher recently, leading us to remain optimistic on near-term economic growth.

3. Corporate earnings. An earnings recession is defined as two quarters of negative corporate earnings. Although 1Q19 earnings had been forecasted to decline from last year, the results so far are trending flat to potentially positive. Earnings estimates for next quarter remain positive.

Despite the temporary yield curve inversion, we believe the equity markets have reestablished the uptrend and we expect to see further gains in the months ahead. As we have pointed out over the last few quarters, volatility is likely to remain and should be expected at this point in the cycle.

Luma Wealth is committed to helping clients achieve their wealth goals through a customized and diversified long-term approach to investing, and you can rest assured that our portfolio managers diligently and regularly monitor market factors and adjust our investment views accordingly.


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Luma Wealth is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. Luma Wealth and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. Luma Wealth and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Luma Wealth and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. Luma Wealth and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.