Broker Check

Letter To Our Clients

February 11, 2019


Most of the country might still be in the throes of the winter, but after extreme cold throughout many parts of the United States, thankfully the weather has warmed up. Stocks followed a similar path, warming up in January after a chilling December. Since the lows in December, the market is up more than 16% (as of Feb. 6, 2019). Some recent reports have been encouraging and point to a steadily expanding economy. Meanwhile, market participants have become more comfortable with the Federal Reserve’s (Fed) message. While these are positive developments, the likelihood for further volatility persists. Investors are encouraged to remain focused on the fundamentals that support a positive outlook for continued economic growth and stock market gains in 2019.

Recent economic data have pointed to a U.S. economy that remains on sound footing. The latest reports on U.S. manufacturing came in better than expected, reversing December’s disappointing data and signaling continued expansion in the manufacturing sector. In addition, more than 300,000 jobs were created in January, while inflation remains contained. These data points signal a growing U.S. economy.

The Fed and the market haven’t seen eye to eye on policy over the past year, but that may be changing. At its last policy meeting, the Fed announced it would be much more patient with future rate hikes, which could remove one of the big uncertainties for investors. The Fed reinforced its stance that the U.S. economy remains solid, and cited factors such as slowing growth in China and Europe, trade risk, elevated uncertainty, and deteriorating investor sentiment as influencing its recent shift. Because of these crosswinds, the central bank has chosen a wait-and-see approach, and will likely hold off on policy moves until there is greater clarity on global economic conditions. The stock market responded positively to the Fed’s message that interest rates would be lower than had been initially anticipated, with its first gain on a Fed announcement day since Jerome Powell took over as Fed chair.  

In closing, although we should remain prepared to weather any further market volatility, these signs are encouraging—much like early signs of spring peeking through the snow. I encourage you to stay focused on the fundamentals supporting the economy and corporate profits.

As always, if you have any questions, I encourage you to contact me.

Sincerely,

John Galego

President & Founder, Atlas Wealth Strategies

 

 

 

Important Information

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Economic forecasts set forth may not develop as predicted.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

 


 

 

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December 27, 2018


After a mixed first half of the year and a solid third quarter, stock markets weakened considerably in the closing weeks of 2018. Turmoil in the financial markets is never a pleasant experience for investors, and that’s why we rely on helpful guidance, context, and insight to help us weather these times and prepare for what may lie ahead. Indeed, LPL Research’s recently released Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets provides investors with a guidebook for navigating a maturing economic and market cycle.

Several factors are weighing on investor sentiment right now, including policy uncertainty regarding trade, weaker oil prices, the path of interest rates, and the geopolitical environment. Despite these pressures, the fundamental backdrop supporting growth in the economy and corporate profits appears to remain sound, suggesting that this market weakness may not lead to a recession in 2019. The U.S. economy remains solid and continued growth is expected to support solid potential stock gains in 2019.

Policy has been a prominent factor this past year, as the contribution from fiscal incentives including tax cuts, reduced regulation, and increased government spending helped boost growth. The combination of these trends propelled U.S. growth toward annual gains of approximately 3% (as measured by gross domestic product), and the stock market managed to achieve all-time highs during the third quarter. Policy uncertainty has increasingly weighed on investor sentiment, however, particularly surrounding the midterm elections and as trade tensions have continued to make headlines.

Anticipation was high for a tariff agreement between the U.S. and China at the G20 summit meeting. Although it concluded with a lengthier path toward progress than most had hoped for, continued progress is still expected in 2019. Oil prices remained weak after the announced OPEC production cut, as investors debated whether weakness was due to slowing global growth. Rather than a demand problem, oil appears to be a supply issue and thus not indicative of a recession, particularly now that the U.S. is the world’s leading producer. 

Perhaps the biggest policy uncertainty weighing on the markets has been the Federal Reserve (Fed) and the future path for interest rates. The Fed’s recent rate hike, coupled with reduced growth forecasts, added to investor concerns and further pressured stock prices. Considering LPL Research’s forecast of steady economic growth and lower than average inflation, the Fed may keep interest rates lower in 2019 than the markets currently fear.

Although market weakness can be alarming and cause investors to question their strategy, this is when we must focus on what matters in the markets and try to remain calm. The combination of high employment, solid consumer spending, improved trends for business investment, and mild inflation should result in a firm, fundamental foundation supporting growth in the economy and corporate profits in the year ahead.

As always, if you have any further questions, I encourage you to contact me.

Sincerely,

John Galego

President, Atlas Wealth Strategies


Important Information

For additional description and disclosures, please see the full Outlook 2019 publication.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Economic forecasts set forth may not develop as predicted.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

 

 

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