How do headlines affect your portfolio? Your Midyear Investment Update

Jerrod Ferguson Market Update

Each summer, we provide a Midyear Investment Update because we believe in not only preparing for life’s uncertainties but also anticipating them before they occur. Here are some fresh financial perspectives backed by decades of expertise and focused on peace of mind.

 

Real News Vs. Fake News

In recent months, news headlines have been heating up, and some investors are questioning the volatility of U.S. and international markets. Amid this concern, our investment advice remains steady: Maintain a healthy portfolio by keeping a cool head, blocking out the noise, and focusing on the opportunities within your control.

In the new world of “real news” and “fake news,” it’s important to approach headlines with tunnel vision for the select issues you know matter. Very few news events, for example, have significant investment implications.

According to Riverfront Investment Group, here are three reasons why:

  1. News with investment implications — such as quarterly earnings or new product announcements — rarely gets media attention and is often quickly discounted. By the time you’ve been made aware of such news, it’s usually too late to do anything about it.
  2. Big headlines, including political scandals and organized public demonstrations, have little or no direct investment implications.
  3. Many times, hot topics like trade talks or budget negotiations are too incomplete, too inconclusive or subject to other variables, making these headlines unreliable investment indicators.

 

News That Matters

So what’s truly worthy of our time and attention? Here’s a quick guide to help you cut through the noise and figure out what’s really affecting your investments.

  • S. Inflation Concerns: Indications of rising inflation could prompt the Federal Reserve to increase interest rates and slow economic growth. So far, however, inflation data has been benign.
  • S&P Earnings: Watch corporate earnings for signals that they’ve hit their peak. S&P 500 earnings growth, however, is expected to be robust this quarter, coming in at an estimated 20.0%, according to Factset.
  • Inflation in Developed Markets: Inflation has started to return in developed markets, and it will be important to see it stabilize around 2%, as it signals an accelerating demand for goods and services.
  • Central Bank Stance: Pay attention to announcements from foreign banks to ensure their monetary policies remain accommodative. The European Central Bank (ECB), for example, announced it would not consider raising rates until summer 2019.
  • Directives from the PBC: The People’s Bank of China (PBC) can be a good indicator for the rest of the emerging markets, and an unbridled Chinese economy can lead to growing demand for agriculture and energy products, which are important exports for many emerging markets.
  • Dollar Direction: As the dollar strengthens, funding costs increase and these markets can underperform. While the U.S. dollar has recently strengthened, emerging market equities have lagged.

 

Just Noise

  • Trump’s Tariffs: While Trump’s escalation of trade disputes between the U.S. and its major trading partners has stirred up some negative headlines, reactions have not yet been unfavorable. In fact, the boost from fiscal stimulus should outweigh the negative impact from tariffs. Further, trade negotiations are still in flux, while tax reform and government spending packages are already positively affecting our economy.
  • Common U.S. Indicators: Employment rates, auto sales and housing stats are no longer considered to be major indicators for investors because these data points can generally be traced to supply/capacity constraints.
  • GDP: Retrospective data, such as GDP, is not a focus for investors in the developed markets because the typically erratic behavior of recoveries can produce false negatives or positives.
  • Geopolitical Concerns: Economic data from China should be interpreted with caution because of its tendency to be manipulated or inconsistent. Additionally, the Middle East, Africa and Latin America have small representations in the index.

 

Talk To Your Advisor

If you’re concerned about volatility and headlines, contact your financial advisor for more detailed and specific advice. A simple conversation can provide immense clarity. It’s our job, after all, to deliver thoughtful, forward-thinking financial advice that keeps you moving toward the life you’ve always wanted.

If you would like to speak with a Vance Wealth advisor, please give us a call at 888-775-0950, or email [email protected] to set up a consultation.

 

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of John Vance and not necessarily those of Raymond James. Raymond James is not affiliated with and does not endorse the opinions or services of Riverfront Investment Group. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in

any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.

 

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