4th Quarter 2018 Newsletter

Highwater Wealth Management

If the up and down (mostly down!) gyrations of the US stock market have you feeling a little seasick, you’re not alone. Sea sickness is the result of a complex physiological reaction to motion and causes a mismatch of information sent to the brain. While it’s usually mild, for some people it can be incapacitating. Investors today are attempting to reconcile degrees of mismatched information, and the volatile market swings are not helping.

The US economy clearly had strong momentum entering the final months of 2018 with GDP growing at a 3.50% rate. Yet many remain concerned about lower future earnings growth, reduced consumer and government spending, and increasing interest rates.

The US equity markets have been trading as if recession is imminent. With today’s strong fundamentals, we disagree. A global growth rate of 2.00% is far from a tragedy, and market sentiment could change as issues dissipate. While we do see indications that economic growth rates are slowing, a US GDP growth rate of 2.50% for 2019 appears likely, and that is enough to fuel continued earnings growth and strong US employment.

The global economy maintained a solid pace during the first half of 2018, with 3.90% year-over-year GDP growth for the G-20 economies – the fastest rate of growth since mid-2011. But uncertainty about Brexit, trade pacts between North and South America, as well as the tariff wars between US and China are cause for concern.

Philosopher Heraclitus wrote that “The only thing constant is change”. This has always been true with financial markets. Sometimes the only way to cope with change and volatility is to tune out the noise. If you need some reassurance, call your advisor and revisit your long-term objectives.

When rough seas make you a little seasick, go up on deck and focus on the horizon.