An October Overview

This year has been nothing short of crazy.  Think about the themes that have driven this market so far this year:

  • A collapse, then recovery, in oil prices
  • Higher interest rates
  • China’s uncertain economy
  • Brexit
  • The most contentious election in the history of our country

Yet, the markets are up for the year in spite of significate volatility.  The punches have been thrown and we are still standing.  Believe it or not, this year is actually following a pretty succinct historical script.  Absent an election year, equity markets generally trend higher until the seasonally weak September/October months. However, during an election year, equity market weakness tends to occur during the summer months and subside as the November election draws near. Historically, markets then rally into year end and the market so far has followed this pattern.  With this precedent we believe the markets could trade higher into year end.

A September Overview

The markets made a surprising move higher this past quarter, in the face of what most thought would be bad news for the global economies: Great Britain leaving the European Union (aka Brexit).  In reality, investors have been comforted by the fact that the FED has decided to leave interests rates low in an effort to inject plenty of liquidity into our slow growth economy.  There are several global themes we are now monitoring for the remainder of the year:

  1. The Presidential election – This one is pretty obvious.  In reality, we all give the US President too much credit or blame for the economy.  The economy is more dependent on who the President puts around him/her.  In any case, it’s a story.
  2. The UK economy – Many thought that the UK leaving the EU would force their economy into recession.  However, it’s too early to tell.  For now, their economy seems to be on sound footing.
  3. Interest Rates – The FED has elected to stay accommodative.  However, at some point, they will need to start raising rates a bit more aggressively, especially if inflation picks up. If possible, it would be ideal to raise rates slowly.

In all, we like the way the markets are reacting, in the face of some challenging global economic news.  We made a big jump just after the UK vote and that move took us out of a two-year range.  This is very positive technical action.  It wouldn’t surprise us to see the markets go through a short-term correction.  But, we believe we will see another market push higher before year-end.   

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As your investment professional, we are committed to delivering performance in a manner that is consistent with your needs, goals and desires. Headquartered in Orlando Florida, Delta Advisory Group serves clients throughout the United States.