With Halloween right around the corner, what are some of the tricks that could get in the way of this bull market?
Trick or treat
The S&P 500 Index is up more than 20% on the year, but that doesn’t mean we should be complacent. The LPL strategists note that some of the big worries still out there include a breakdown of U.S.-China trade discussions, the worrisome signs out of the bond market, a potential Federal Reserve (Fed) policy misstep, slowing global manufacturing, and geopolitical risk. From Brexit to populism in Europe, Hong Kong protests, and Japan-South Korea tensions, the list of geopolitical concerns is long and very real.
The Fed is on tap
The big event this week will be the Fed policy meeting, where the Fed is expected to cut rates by 25 basis points (.25%). This would be the third consecutive 25 basis point cut after hiking the rate nine consecutive times. As Mark Twain said, “History doesn’t often repeat, but it often rhymes.”
Looking back at other times when the Fed started off a cycle of rate cuts with three consecutive cuts, we have seen extremely strong performance going out a year. “Don’t fight the Fed” is one of the oldest market adages around, and it very well could play out again.
Greenback is dipping
The U.S. dollar, also known as the greenback, is facing its largest monthly drop since January 2018. The dollar had been relatively strong so far this year, but has taken a decided dip lately. Sparking much of this move has been strength from the British pound and euro. As the likelihood of a “hard Brexit” moves drastically lower, these currencies have spiked. The strategists noted that a lower dollar does have some nice benefits, as it makes U.S. exports less expensive for international consumers. It is also a tailwind for international stocks, which can help diversified portfolios.
The best year ever?
Think about this: Stocks, bonds, gold, and crude oil are all having very good years in 2019. This actually comes on the heels of 2018, the first year ever that all four assets finished lower than the previous year, so a bounce across the board may not be so odd. Still, we’ve never seen a year in which all four assets were up double digits, and there’s a decent chance it could happen this year. In fact, only bonds aren’t up double digits right now, but as our chart shows, they are quite close.
It has been a great year for stocks, bonds, gold, and crude oil. Of course, there are still more than two months to go in 2019, but this year is shaping up to be one of the best years ever for these four important assets.
Tune In Now
Listen to the entire podcast to get the LPL strategists’ views and insights on current market trends in the US and global economies. To listen to previous podcasts go to Market Signals podcast. You can subscribe to Market Signals on iTunes, Google Play, or Spotify.
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. The economic forecasts set forth in this material may not develop as predicted.
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. All performance referenced is historical and is no guarantee of future results.
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 has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not bank/credit union obligations and are not endorsed, recommended or guaranteed by any bank/credit union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
For Public Use — Tracking #: 1-909907