13 Nov Market Update – Nov 2018
Sklar Capital Advisors
Fall Market Update- Nov 2018
A Very Disappointing Year
It is easy to point to numerous reasons why this year has been disappointing for investment returns. All one has to do is to read the headlines every morning: Trump, trade, TRUMP, trade, Trump, trade, etc… This is the common knowledge; however we believe there are more important causes that recently developed. But first, here is how markets have performed through October:
|U.S. Large Caps||1.8%|
|U.S. Small Caps||1.8%|
|U.S. Investment Grade||-4.0%|
|U.S. High Yield||1.1%|
|Emerging Market $ Bonds||-4.8%|
Needless to say, everyone who owns a diversified portfolio of stocks and bonds is seeing losses. The average moderate portfolio is down about -5% or more. The US remains the one bright spot with slightly positive performance while the rest of the world is suffering. We eliminated our international investments during the summer months, which added protection. Overall, our clients are not seeing large losses and we will continue to manage risk. Bonds have also not lived up to their safe haven status as fears of rising interest rates continue to spook investors.
Our expectations for 2018 were for another positive year due to the strong economy, continuing record profits, and solid momentum from last year. These have come to fruition, but the boogey man has recently appeared, better known as the Federal Reserve. The Fed has recently switched stances from being accommodative to markets to now being antagonistic. By signaling and continually willing to raise interest rates until they slow down the economy, this has sent shockwaves through markets as now the cost of borrowing is rising for everyone. Any company that needs to borrow for business expansion or any family who wants to buy a home is facing increasing costs. Higher interest rates have preceded almost every recession and large stock market decline. We believe this is a much bigger factor than political games. If interest rates continue to rise, we will see a recession in the near future. We are also seeing international countries slow down and deal with numerous economic troubles.
We are hopeful that we can see one last rally into the end of the year, but we are being extremely vigilant and will continue to reduce risk. The times ahead will be for protecting account values, not for taking risks.