Economic Insights - September 2019

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As of this writing, the S&P 500 is less than 1 percent below an all-time high, yet market participants are drowning in the negative news backdrop and geopolitical drama. The ongoing trade talks, the Brexit fiasco, another political crisis in Italy, the Hong Kong protests, and generally weak global data are making nearly everyone nervous.

With all of the uncertainty floating around, if you are confused, you are not alone.  The characteristics and nature of the stock market mean that surprises tend to be the norm, not the exception.  Yet, market participants are asked to make important decisions while managing their finances, based on these circumstances.  As the first chart in the “Economic Insights” section of the printable Business Briefings issue shows, the “experts” have no idea of what to make of this investment environment.  In fact, there hasn’t been this much confusion in at least 20 years.

No one really knows for sure if a stock or the entire market has peaked.  Nor do we know for sure when the next correction will be, how long it may last and how deep it will be.  The same is true with rallies; no one really knows for sure how high they will go and when that high is too low.

Then, there are questions about the economy.  Where are we in the business cycle?  What will it look like 2 years or even 6-to-9 months down the road? Add on the uncertainty of inflation, interest rates, etc., and it makes a sane person wonder how in the world can they cope and make any sense out of all of the unknowns.

And since all of those external unknowns are out of our control, they render all of those concerns meaningless.  This is where the majority of investors become lost.  That ‘meaningless’ comment is hard for an investor to comprehend.  In order to help one understand that concept, and how stock markets “works”, simply look at where the S&P sits today and remember ALL of the angst over the trade tariff situation that began in January 2018.

We may not be able to predict where stocks will go, but we can predict how we are going to react.  That is well within our control.  Many investors fail because they overreact.  So, they lose sight of what really matters; that is price...

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