I thought it would be relevant to send this note given the recent market volatility.
Uncertainty can bring tension and fear. Large swings in the stock market can spooked investors and bring some concerns. Upward pressure on interest can be perceived as a sign of inflation. As Jerome Powell replaces Janet Yellen as Chair of the Federal Reserve, most investors, economist, banks and financial institutions are preparing for a shift in monetary policy.
However, the recent market volatility is an overdue correction and not the start of a bear market. The economy and corporate earnings remain strong. The national unemployment rate remains at 4.1%, a historic low for the country. Higher interest rates are signs of a healthier economy and can be a tailwind for a good stock market performance.
Furthermore, the recent tax reformed signed last December will help the U.S. be more competitive with other economies around the world. Corporate and personal tax rates have been reduced. These tax savings will continue to fuel positive economic growth.
Volatility is likely to remain high for the rest of the year. So, what’s an investor to do? Volatility and corrections create opportunities. For investors with a long-term horizon, corrections are opportunities to rebalance portfolios, make tactical changes, reallocate capital from out of favor sectors and take profits.
If you would like to read more on this subject, enclosed is a brief market summary from Bob Doll, Chief Equity Strategist from Nuveen that I think might be of interest to you.
Dennis Coral, MBA, CWS®