Q2 2019 Economic and Market Perspective

The last few days of Q2 2019 were not typical of the end of a period. The trade summit between Presidents Trump and Xi on June 29 came one day after the final trading session of Q2 and the path of least resistance of the stock market is likely to weigh in the balance. The rise of tension that accompanied the trade dispute in mid-May led to selling in the stock market which has moved up and down over the past months as a result of the shift from optimism to pessimism over the impending trade deal between the world’s leading GDPs. While the “renewed” trade talks have already begun, we can continue to expect the fluctuation as we make our way to a peaceful but costly negotiation.

With this continued volatility, what we predicted has come to pass and we will continue to settle into “The New Normal” of a turbulent stock market. After the disaster of Q4 2018 and a promising rise in Q1 2019, the perception of standstill Fed rates has shifted from relieving to thought provoking. While Fed rate cuts are conducive to a positive performance of the equities market, the reasoning behind a more conservative Fed could have the potential to weigh on stocks. Investors were quick to be relieved with the announcement of consistent rates but it’s prudent to consider that the Fed pushed them too far in 2018 causing a stint in economic growth, or perhaps even waited too long to make the cut. Going into Q3, our eyes are on the Fed as they will more than likely be tactful moving forward and we could be looking at short-term interest rate cuts to maintain a balance.

According to Investopedia, Financials, and Gold came in as our top Q2 performers whereas Health Care, Energy, and Agriculture finished with a bit to be desired. Tame inflation and a moderate risk for a recession has kept the Financial sector at bay for now but as previously mentioned, Fed rates are subject to change and will prove to be a factor in Q3. Looking forward, Energy and Agriculture can stand to benefit from the trade conversations depending on how they develop, assuming Trump moves forward with the billion-dollar plan of exporting liquid natural gas to China while China pours equity into U.S. farm products (eye for an eye). This is a perfect example of why we believe the stock market should be treated as a living, breathing, organism: While the food we eat and the weather will affect our quality of life, the money poured in and the state of our country will affect the stock market.

With so many factors weighing on the market, we suggest moving into Q3 with cautious optimism. As fears of a recession start to fade, they’re being replaced with uneasiness as the US-China trade dispute continues down its winding path, hopefully on its way to a destination that fuels the economy and promotes peaceful negotiations moving forward. Regardless, we always maintain that no matter the fluctuation of the stock market, keeping a balance in your portfolio’s timeline is the primary goal. Now is the time to determine your risk tolerance in the best of circumstances while also putting heavy consideration on the possibility of things taking a turn for the worst and planning accordingly.

As always, feel free to reach out to your team here at LPWM Group if you have any questions on your portfolio or the insight above.

For further information please email: Info@Nashvillepwm.com