News & Insights
YorkBridge Third Quarter Commentary
Summer has typically been a quiet time for markets as investors step away, recharge, and spend time with their families; however, while both equity and fixed income returns were slightly positive for the quarter, these summer months were anything but quiet. During the period investors had to digest a number of factors impacting the markets including; an escalating US-China trade war, a 2nd interest rate cut from the Federal Reserve, an inverted yield curve, and the news currently unfolding that is dominating our collective thoughts, a formal impeachment inquiry against the President of the United States.
Against this backdrop markets remain volatile. Year-to-date through the end of the 3rd quarter the S&P 500 has returned +18.74%, the broader market, as measured by the Russell 3000, is up +18.38%. International equities, while having strong absolute performance (+8.85% MSCI ACWI ex US) continue to underperform the U.S markets. Fixed Income has had similarly spectacular returns this year. After raising rates throughout 2018, the Fed has turned dovish and cut rates over the past two quarters causing the prices on existing bonds to extend higher. Investment Grade bonds as measured by the Barclays US Aggregate Bond Index is + 8.52% YTD.
Though these numbers look strong on the surface, if we widen our focus, we see that equities are only slightly positive dating back to January 2018, which reinforces the difficulties clients face when navigating today’s markets. Geopolitical friction continues to be a major driver of volatility in the short term. While we have discussed the US-China trade war in previous notes, and still believe that an agreement between the two countries can be reached, U.S trade policy is becoming increasingly unpredictable as evidenced by the threat that the U.S. could reduce the flow of capital into China in addition to increased tariffs. It was also announced last week that The House of Representatives has launched an impeachment investigation into the President. Headlines and Tweets out of Washington will, no doubt, capture the attention of the public and may cause short-term movements in markets. We continue to believe investors will be better served focusing on the long-term economic data.
On that front, the recent economic data has been mixed. Both global manufacturing and business investment have slowed of late but remain expansionary; but nevertheless, a clear sign that the trade war is having its effects on corporations. On the plus side, consumer spending and the labor market continue to be strong. The unemployment rate sits just above all-time lows and hourly wage growth (which remained stubbornly low during earlier years of the recovery) has picked up as well. This in turn has propelled a surge in consumer spending which bodes well for the U.S. since two-thirds of U.S. economic activity is tied to consumer consumption.
Though economic uncertainty remains elevated, it is still our view that a recession in 2019 is unlikely. We recommend clients continue to stick with their strategic asset allocations and remain disciplined in the face of volatility.
We will continue to carefully monitor the Congressional proceedings over the coming weeks to determine if any change to our view is warranted. We encourage you to review your portfolio and call us if you have any questions or would like to review.
The Information contained in this document is based on data received from third parties which we believe to be reliable and accurate. YorkBridge Wealth Partners, LLC has not independently verified the information and does not otherwise give any warranty as to the truth, accuracy, or completeness of such third party data, and it should not be relied upon as such. Any opinions expressed herein are our current opinions only. YorkBridge Wealth Partners, LLC is an SEC Registered Investment Adviser under the Investment Advisers Act of 1904 (“Advisers Act”). Registration of an investment advisor does not imply any specific level of skill or training. The information contained in this document is to assist with general planning. Please consult with your own tax advisor and attorney for more specific information.