News & Insights
YorkBridge Third Quarter Commentary
October 15, 2018
The third quarter saw continued global economic expansion, however, there was revealed a glaring disconnect between the pace of growth in different geographic regions around the world. Here in the US, second quarter GDP growth came in at a strong 4.2% annualized rate which was slightly above consensus. What is driving this outsized economic growth in the US? One can point to the large fiscal stimulus enacted at the start of the year as the primary contributor to increased spending at both the consumer and corporate levels. Corporate earnings continue to be strong with a vast majority of the companies in the S&P 500 beating quarterly earnings estimates. We expect a similar result when earnings announcements begin to print within the next few weeks.
However, risks and uncertainties still persist: 1) the administration’s protectionist trade agenda could curtail economic growth both domestically and abroad; 2) personal wages are not growing as fast as the robust economic and unemployment numbers might suggest; 3) economic growth outside of the U.S. is most definitely slowing down and has perhaps even peaked; 4) upcoming mid-term elections could lead to a change in leadership in the House (the consensus view is that this is slightly likely but not certain) and the Senate (the consensus view is that this is possible but unlikely).
Against this backdrop, we are generally constructive on the global economy and overall market. Though we anticipate growth to decelerate as we move into 2019 and beyond, we remain in an expansionary environment. Given the increased earnings growth, coupled with slowly rising interest rates, we see no reason why the market cannot move higher, albeit with increased volatility.
The “dog days” of summer have ended, and October has historically been a month plagued by high levels of volatility, which came in with a vengeance the second week of October 2018. On October 1, 2018, at the start of the fourth quarter, the S&P 500 was up 10.56% while the 10yr US Treasury rate was at 3.05%. Fast forward 12 days and the S&P 500 is up 5.07% and the 10yr US Treasury rate is at 3.15%.
Volatility in the market is normal and 1% swings in the S&P 500 are not uncommon. On average, the S&P 500 experiences 62 days with a 1% price swing. Year to date we have had 39.
We will continue to remain vigilant and carefully monitor the global economy for warning signs and believe strongly that current conditions justify a diversified approach for long-term investing.
As always, we welcome hearing your thoughts and concerns and remain committed to protecting and enhancing your financial well-being.
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 1940 (“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.