Daily Capital

Weekly Market Digest: Is The Selloff Over?

Global equities continued their upward march on the back of last week’s positive jobs report and dovish comments from Fed Chairman Jerome Powell. Trade talks between China and U.S. also showed signs of progress, adding fuel to the rally. The positive momentum was enough to overcome a few negative reports from retailers, allowing equities to finish nicely positive for the week. Gold was relatively flat while commodities moved higher on rebounding oil prices.

Weekly Returns

S&P 500: 2,596 (+2.6%)
FTSE All-World ex-US (VEU): (+2.1%)
US 10 Year Treasury Yield: 2.69% (+0.02%)
Gold: $1,288 (+0.2%)
USD/EUR: $1.146 (+0.6%)

The Tool To Beat

Major Events

  • Monday – The U.S. and China kicked off a new round of trade talks, hoping to flesh out details on important issues such as IP protection and subsidies.
  • Tuesday – Reports surfaced that the U.S. and China were making positive progress in their discussions, helping push global markets higher.
  • Wednesday – The most recent Fed minutes showed the central bank will be flexible and could be close to ending its series of rate increases.
  • Wednesday – Negotiations between Democrats and President Trump over border wall funding fell apart, extending the partial government shutdown.
  • Thursday – Macy’s, as well as a number of other retailers, reported weaker than expected post-holiday sales.
  • Friday – A sales director for Huawei Technologies was arrested in Poland on charges of high-level espionage.

Our Take

Is the selloff over? Maybe. Maybe not. But as we’ve pointed out before, it’s felt more like a correction than the beginnings of a larger bear market and recession. It’s been fast and steep, and the rebound thus far has been just as sudden. If you blinked you may have even missed it.

So what kind of investor have you been over the last few months? Did you get scared and jump ship, or have you stayed the course and stuck to your long-term allocation? If you went to cash you would have missed the recent rebound, which is already up around 10% for U.S. stocks. That’s a solid return, and one any investor should be happy to achieve over an entire year. This one only took a couple weeks. Or did you get greedy last year, ditching those much hated emerging market stocks in favor of red hot domestic tech? Many investors did just that. Turns out EM has fared the best in this selloff, down less than half that of U.S. stocks since the September high.

This is all just textbook evidence as to why timing the market and succumbing to emotional investment decisions can hurt portfolio returns. At the end of the day, the vast majority of investors will be more successful simply creating a proper long-term allocation and sticking to it. If anything, the current pullback is a great opportunity for rebalancing back to target weights. At the moment, this likely translates into buying more stocks. And why not? If you liked stocks when markets were at all-time highs in September, why wouldn’t you like them now when they’re on sale?

How should you react in a volatile market? Get our take.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Brendan Erne, CFA
Brendan Erne serves as the Director of Portfolio Implementation at Personal Capital. He has over 15 years of industry experience, spanning almost all levels of the investment process, including several years at Fisher Investments as an equity analyst covering the Technology and Telecommunications sectors. He also co-authored Fisher Investments on Technology, published by John Wiley & Sons. Brendan is a CFA charterholder.

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