Equity markets have displayed extreme volatility in recent months, but we believe the worst is over. On Monday, December 24th the S&P 500 index experienced Capitulation. Capitulation is reached when a large number of investors “throw in the towel,” so to speak, based on a complicated mathematical calculation of market momentum. &nb
Volatility in the equity markets continues as we near the midterm elections. We believe the volatility is largely a result of uncertainty regarding the election outcomes. The US economy remains strong and there does not appear to be a recession looming in the near future. Once the elections are over we expect equity markets to trade based more on earnings and less on ancillary
The recent declines in equity markets have been attributed to rising interest rates by many pundits and our media in general. We believe, however, that there may a different culprit: uncertainty. The midterm elections coming in early November have cast a lot of uncertainty regarding hundreds of seats in Congress.
Welcome back to volatility. The reason we say “welcome back” is because we haven’t seen much in recent years and appear to be returning to normalcy. The S&P500 hit an all-time high in late January only to see a pullback of just over ten percent.
The markets have lifted out of correction territory and seem to be back on the rise. We won’t be out of the woods until we break above the all-time highs of January. A bear market is always a possibility but it seems unlikely with year-over-year earnings up 26% on the S&P500*. Thus, there is still no recession in sight, largely because of the new tax law.
Last week the Dow Jones Industrial Average interrupted its strong run, and thus far is within the fluctuation realm when considered on a percentage basis.
We hope this letter finds you well.
Happy New Year! 2017 was an impressive year for investors both foreign and domestic. We are optimistic that 2018 will be prosperous as well. Our economy is growing, unemployment is low, and we expect additional growth as wages and Gross Domestic Product (GDP) are spurred by the historic tax overhaul. In short, we see no signs of any recession in the near future.