-Q4 2018-
Looking Back – 2018
Volatility was a common theme, with the S&P 500 experiencing more moves of 1%+ in the first two months of the year than in all of 2017!
US Midterm Elections resulted in a divided Congress as Democrats gained control of the House of Representatives and Republicans maintained their control of the Senate.1
Rising interest rates as the Federal Reserve announced four rate hikes in 2018. While rising rates indicate that the Fed is confident in the strength of the U.S. economy, it can also create additional long-term economic concerns such as reduced consumer spending and delayed corporate expansion.
Geopolitical headlines continued to dominate the news, with many of these events directly impacting global markets. Events included a historic meeting between President Trump and Kim Jong-Un, a Turkish Financial Crisis, and the recent G20 Summit where a short-term resolution to the ongoing Trade War between the U.S. and China was achieved.
Trade Update
The United States and China agreed to stop escalating the tit-for-tat tariffs that began back in January.
Since the truce, there have been goodwill gestures including China resuming the purchase of U.S. soybeans and cutting tariffs on imported U.S. cars.2
While the truce will delay the planned tariff increases until March 2nd, it will still only begin to bring the U.S.-China relationship back to the pre-trade-war status quo.
To achieve greater progress, the two sides must resolve U.S. demands for structural policy changes in China.
Looking Ahead – 2019
Positive consumer spending trends and earnings numbers will look to offset tariff fears and rising interest rates.
Even if current expansion continues, future economic growth could be tempered. Low-to-mid single digit market returns, and increased volatility are both very real possibilities in coming years.
Many experts forecast a continuing slowdown of GDP growth through 2020.3
Resources:
https://www.washingtonpost.com/politics/midterm-elections-democrats-flip-house-as-gop-expands-senate-majority/2018/11/07/
https://www.cnbc.com/2018/12/17/reuters-america-analysis-china-trade-steps-seen-as-good-start-but-leave-core-u-s-demands-untouched.html
https://seekingalpha.com/article/4228911-moderate-slowdown-expected-u-s-gdp-growth-q4