A November/December Overview
As we pass through the final quarter of 2018, the U.S. equity market has seen markedly more volatility than in the prior year. A combination of rising interest rates, tariff threats and general European instability have led investors to take a more defensive posture in the latter half of 2018. This repositioning led to a near 10% drawdown from our September highs in the equity markets, and the 10-year treasury yield has risen nearly 30% in 2018. International markets have fared poorly this year, after a strong showing in 2017. Emerging markets, too, have come under pressure from rising interest rates, pushing a broad index of developing economies down 25% this year. Even taking into account the challenges of the global economy in 2018, U.S. corporate profits remain strong, and there are quite a few bright spots in the U.S. economic data. GDP growth has ticked up in 2018, and real wages are on the rise for the majority of the workforce—two indicators that have been stubbornly static for most of the recovery. November and December are historically strong months for the U.S. markets, and we believe that our current volatility will resolve itself into higher prices in the intermediate term.
As we reflect on this holiday season, we wish you and yours a very wonderful Thanksgiving, as well as, a Merry Christmas, and the very best of good health and prosperity for the New Year.