It is hard to believe that we are rapidly moving toward the end of the third quarter and that the year-end will be upon us before we know it. It has been an eventful year so far, and we don’t see the 4th quarter any differently. The mid-term elections, tariffs, and trade negotiations are likely to continue holding our attention throughout the 4th quarter. With that said we wanted to ask you to save the date for our upcoming town hall event. Put November the 8th on the calendar and join us for our second town hall meeting where your friends from Stone Bridge and a few special guests will take questions from the audience on investments, the economy and the mid-term impact. Look for a separate email in the coming days that will have more details.
For most of the year, many investors have been concerned about tariffs and their impact on global trade. It has created a very volatile environment, despite US equity markets currently trading at or near all-time highs. Even though this has been the longest bull market in history, it seems that many experts are looking for the beginning of the end (economically speaking). According to money management firm Franklin Templeton, bull markets don’t typically die of old age. There needs to be some fundamental reason for a bull market to end. While volatility has picked up this year, US markets are still healthy, fueled by the consumer and by robust corporate earnings. This bull market has been led by global growth and technology. But don’t be in such a hurry to compare this tech run lead by FAANG (Facebook, Apple, Amazon, Netflix and Google) to the tech bubble of the 90’s. These companies actually have earnings, stockpiles of cash, and make products or provide services that are used in hundreds of millions of people’s homes.
We continue to see strong data come from the ISM, the Institute for Supply Management, in both the services and manufacturing sectors. There has been a recent spike in new orders for both groups. This increase in new orders could be driven by all the threats of coming tariff increases. Labor markets continue to show strength and we even saw an increase in wages. This data certainly gives the Federal Reserve the ammunition it needs to continue to raise short term interest rates at their next meeting in mid-September. This will be the third interest rate hike for the year, pushing short term rates in excess of 2%.
It appears that economic conditions look pretty healthy. We do want to note that traditionally September has been a very volatile month. It appeared at the beginning of September that concerns from trade and global growth were going to hold it to tradition. Yet those concerns were tossed aside as the S&P returned to hitting new highs. In a recent report, money manager Federated wrote, “Since 1929, Q4 of midterm years through Q2 of pre-election years have represented the best 9-month stretch of the 4-year U.S. presidential cycle, with bullish tailwinds typically starting in October.” Our June “Notes” reported a similar finding from MarketWatch’s Mark Hulbert. If that holds true for this cycle, it would take us right through the middle of 2019. Now that would be something to look forward to!
Please don’t forget to put our panel discussion on your calendar for Thursday, November 8 from 4:30-6:00pm and be on the lookout for the invitation with all the details. We should have plenty to talk about and hope you will be able to attend. Until then please don’t hesitate to call or email us with any questions or concerns.