Silver Linings - Q3'19 Investment and Economic Commentary

Turn on CNBC or Bloomberg for any amount of time, and you will want to have a couple of shots of your favorite stiff drink. We see weak manufacturing, continued uncertainty around Brexit, and a never-ending trade war. On top of all this, we see market participants are flocking to safer U.S. Treasuries. Yes, there are a lot of points of weakness in the current economy. However, let's take a look at the silver linings.

First, The U.S consumer continues to provide strength to the current economy. Inflation is low, which places less pressure on households' budgets. At the same time, we are seeing that income is increasing. Strengthening personal budgets allows for individuals to have more purchasing power and is a real source of strength for the U.S. economy. At the same time, unemployment came in at 3.5% for September, a low reading.

Second, during the past quarter, the Federal Reserve cut interest rates twice. The Fed decreased rates to address concerns regarding a slowing economy. This accommodation helped U.S equity markets. We also saw other central banks around the globe cut rates due to slowing growth. With interest rates so low already, and more and more bonds trading with negative yields, it is unclear what central banks will do if the economy continues to shrink. Many think these monetary planners will restart bond-repurchase regimes as we saw during the last recession. Whatever their actions may be, central banks continue to take steps to address concerns of a slowing economy, and this assuages investor angst.

Third, over the past quarter, we saw increased concerns around manufacturing both overseas and at home. Most of these concerns point to the continued ambiguity surrounding the U.S.-China Trade War. Uncertainty in trade policy makes it harder for manufacturers with extended supply chains to make business decisions. We saw this reflected in manufacturing data published over the past quarter. The Institute for Supply Management Index recently showed a contraction in U.S. manufacturing. And the export-driven German economy shrank. Manufacturing sector activity provides insight for future unemployment rates. The silver lining is that in recent weeks, we have seen these concerns place pressure on both American and Chinese trade negotiators. There is a greater sense now that a truce will be negotiated currently (or at least an incremental agreement) because both sides are not willing to suffer the longer-term consequences of not settling the trade war. 

During times like these, it is easy to get caught up on the media hype of pending doom. Your financial plan cuts through the confusion and helps maintain focus. It is essential to reflect on the work placed into determining how much risk you are willing to accept in your portfolio. We don't know what tomorrow will bring. But making informed decisions, in lite of your financial plan, about the risks taken will make it easier to navigate these uncertain times. Our strategy at Pursuit Planning and Investments, LLC, remains to focus on a long-term view of the market.

We encourage you to maintain a focus on what matters:

• Financial planning is a process, not an endpoint

• Concentrate on long-term goals and objectives

• Focus on reaching goals, not on beating benchmarks

• Maintain a disciplined approach, in good and bad markets

• Invest broadly and globally; asset allocation is key

• Reduce investment and tax costs where possible

• Rebalance your portfolio as necessary

Below is a link to a complete reflection on markets and news in the investment space during Q3'2019. Feel free to share and reach out to me with any thoughts you may have.

Best,

Nate

View the complete Q3'2019 Quarterly Market and Economic Perspective

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