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Weekly Market Digest: Week Ends With Volatility

This week US and Global markets grappled with what to weigh more heavily – the benefit of a broader extension of an easy monetary policy from US and European central banks, or concerns around the state of global economic growth (the very same reason central banks have signaled an extension to easy money policies).

Markets domestically and abroad reacted negatively to less favorable economic reports Friday, and for the first time in over a decade we saw an inverted yield curve, where the US 10 year Treasury yield dipped below the 3 month US Treasury bill yield.

Yet the outlook is not completely bleak. As an example, unemployment in the US hovers around 4%, a relative low which the US has seen only for 5 periods since 1950. (US Bureau of Labor Statistics).

Weekly Returns

S&P 500: 2800.7 (-0.8%)
FTSE All-World ex-US(VEU): (-1.4%)
US 10 Year Treasury Yield: 2.44% (-5.95%)
Gold: $1,313 (0.9%)
EUR/USD: 1.130 (-0.3%)

Major Events

  • Monday – A third vote on British Prime Minister Teresa May’s Brexit plan was prevented by the speaker of the House of Commons, creating further uncertainty.
  • Tuesday – The Wall Street Journal reports that Bitcoin “is in the longest slump of its 10-year history.” Bitcoin was priced just above $4,000 as of the 19th, down from around $20,000 in late 2017.
  • Wednesday – Fed announces that they will very likely keep interest rates as is for now, in addition to slowing the decline of its $4 trillion balance sheet.
  • Wednesday – Walt Disney Company completes its $70+ Billion acquisition of 21st Century Fox.
  • Thursday – Well known apparel company Levi Strauss returned to the public market via IPO, after being taken private in the 1980s.
  • Friday – The Yield Curve Inverted, with US 10-year Treasury yield falling below 3-month Treasury bills.

Our Take

From a tough fourth quarter in 2018 to a strong rebound in 2019, investors are likely once again a bit spooked after today’s volatility. I’d argue, however, that today’s volatility is a critical component of the success of a diversified, methodically rebalanced investment strategy.

Look at holdings such as utilities, gold and bonds (remember yields go down when prices go up) which played largely positively for investors today, while much of the rest of markets fared relatively poorly.

Should this trend continue, those with the ‘boring’ asset classes mentioned above, will be well positioned to sell into strength in these areas, and buy into weakness in other areas. Whether Monday brings further negative volatility to the table or a rebound from today’s uncertainty, one way to lessen the impact to your “sleep-at-night” factor is to remain disciplined and diversified.

Read More: Market Commentary

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.

Paul is a Certified Financial Planner® and has been with Personal Capital since they first moved to Denver in 2013. With over a decade of industry experience, Paul’s current role as Vice President, Advisory Service at Personal Capital keeps him focused on a team of financial advisors and their clients.
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