Short-term recovery for the markets

BY: FAZAAD BACCHUS 

Hope is never a strategy. A month ago I had written that the markets were generally down all over, bonds were struggling, equities were struggling and investors had no idea where to get returns for their clients. Up until the end of November, there seemed to be no chance of growth and the markets would close at a loss.

But hope, which is never a strategy, is here for a little bit. It appears that for the month of December we may see some recovery followed by continuing growth over the next three months. What is causing all of this? Well as you might remember, we are where we are because of rising interest rates and trade wars. The Feds have been at interest rates and the trade wars have taken a toll on all investors.

At the most recent G20 summit, which appeared like a drama for some, there has been some progress. At this meeting, there was an easing of the trade wars between China and the US, albeit for the next 90 days. The White House has indicated that Trump agreed to hold off on plans to raise tariffs January 1^st, 2019 on $200 billion in Chinese goods. Xi agreed to buy a “not yet agreed upon, but a very substantial amount of agricultural, energy, industrial” and other products from the United States to reduce America’s huge trade deficit with China. Obviously, this is good news and more than likely will push markets upwards over the next three months.

Then there was the signing of the new NAFTA agreement now called the USMCA agreement (US, Mexico, and Canada Agreement), even though it has not been fully passed as yet. According to Trump, it’s going to be a take it or leave it deal, he is threatening that if it’s not accepted then there will be no NAFTA, period, we have to wait and see how that pans out. And yes, it’s been a sore point on the investment market for the last two years, when there is uncertainty the markets reacts accordingly. However, it does signal movement in the trade agreements and again that is expected to push the markets up.

Well one day after all these good outcomes, one analyst has just informed us that the yield curve has inverted. This yield curve is the thing that has predicted the last two recessions. Well, hopefully, the G20 summit news which will cause the markets to rise will offset the yield curve. What choice do you have, what control do you have over G20 summits, political landscape, climate changes, trade wars, and inverted yield curves. The truth is you don’t have any control over these events neither can you predict what effect they will have on the market.

What decisions do you take then when it comes to investing? Bury your head in the sand and hope for the best? Remember “Hope is not a strategy”. Your strategy when it comes to investing is to find a very good advisor who has good portfolio managers who have a good track record of making clients money. No one can prevent the markets from volatility like no one can prevent the oceans from getting rough, but when it does, make sure you have a good captain.