October Uncertainty Spooks Investors

Market Updates

October Uncertainty Spooks Investors

Stocks have tumbled this week, reflecting investor concerns around topics including earnings, global tensions and interest rates.

October 24, 2018

Stocks tumbled this week on fears surrounding corporate earnings, global economic growth, rising interest rates, and the continued fallout of protectionist trade policies. Since October 1, the Nasdaq, S&P 500, and Dow Jones Industrial indices have fallen 11.6%, 9.1%, and 7.8%, respectively. Global markets were similarly impacted and continued their ongoing declines, with developed and emerging markets down 11.0% and 11.2% respectively for the month.1 Technology stocks have led the decline in the U.S. while Chinese equities continue to weigh on international markets.

Meanwhile, significant geopolitical developments continue to simmer. Ongoing Brexit negotiations, debates over Italy’s budget, tensions surrounding Saudi Arabia, and the upcoming U.S. midterm elections continue to give investors cause for concern.

However, there’s hope yet for investors, explains European Strategist Chris Bailey. “It is certainly possible [that] the upcoming midterm election results will induce a more conciliatory tone to world trade discussion,” Bailey notes, wherein “compromises are found in the Brexit and Italian budget debates and China continues encouraging its burgeoning consumer base to boost their spending – a combination that would have a positive impact on global markets.” He adds, “Important for this may well be a lower value for the dollar against many of its key global currency peers.”

We believe the long-range outlook for the economy remains positive, though volatility is to be expected. Periods of calm, such as the months leading up to October, tend to be followed by turbulent re-adjustments, explains Raymond James Chief Economist Scott Brown. “We continue to view this as a normal pullback and not something worse,” adds Senior Portfolio Analyst Joey Madere. And furthermore, “with earnings and economic growth being supportive of equities, valuation is now much more attractive.”

In fact, the tumult in the domestic and international stock markets may be opportunity in disguise. While recent short-term volatility may read as a cautionary tale to some, the market has seen periods like this before – and subsequent rallies. It’s not always easy to take a long-term view in the throes of an up-and-down cycle; however, a well-structured financial plan can help you weather these occasional fluctuations. 

Your advisor will continue to closely monitor market movements. In the meantime, please reach out to him or her if you have any questions.

1As measured by MSCI’s EAFE and EEM indices.

Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc., and are subject to change. Past performance is not an indication of future results and there is no assurance that any of the forecasts mentioned will occur. The process of rebalancing may result in tax consequences. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. These international securities involve additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. An investment cannot be made in these indexes.

International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. Small and mid-cap securities generally involve greater risks. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. The performance noted does not include fees or charges, which would reduce an investor's returns. Asset allocation and diversification do not guarantee a profit nor protect against a loss. Debt securities are subject to credit risk. A downgrade in an issuer’s credit rating or other adverse news about an issuer can reduce the market value of that issuer’s securities. When interest rates rise, the market value of these bonds will decline, and vice versa. U.S. Treasury securities are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. Material prepared by Raymond James for use by its advisors.



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