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A Pea Soup of Volatility - December 10, 2018

Trade tensions, an arrest in Canada of the CFO of a major Chinese telecom firm (requested by the US), Brexit jitters, and a minor inversion of the yield curve created a volatile atmosphere last week.

While economic fundamentals are the medium and longer-term drives of equities, short-term events can influence shares. We’ve seen it before, and we’ll see it again.

Yield curve – what is it, why it’s important

The yield curve simply measures the yield of a particular class of bonds at various maturities.

Normally, yields are higher for longer-term bonds than shorter-term bonds. Think of it like this – if you are willing to lend someone money over a longer period, you’d expect to get a higher rate.

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Today’s selloff - November 4, 2018

There was nothing specific to pin today’s decline on, but analysts pointed to 3 factors—

    • Doubts the short leash on the US/China-trade truce will lead to a more permanent accord
    • Yesterday’s minor inversion of the yield curve: the 3-yr yield rose above the 5-yr yield
    • PM Theresa May’s uphill struggle to get her Brexit deal approved

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October’s Cool Breeze Flows into November - November 4, 2018

The midterm elections have ended, and stocks were supposed to resume their upward march, right? Did you know that since 1950, the S&P 500 Index has gained ground in every 12-month period that followed a midterm election? It’s an impressive 17 for 17, according to stats complied by the Wall Street Journal. The average increase has been 15.3%.

Well, we’re less than four weeks outside the election, and shares are struggling to follow the script.

The S&P 500 Index shed 10.2% from its September 20th high to the most recent low the day after Thanksgiving (St. Louis Fed). The decline wasn’t atypical and was likely related to the various economic fundamentals. Thanks to a late-month rally, major U.S. market indexes managed to end November in the green.

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A Shift in the Atmosphere - December 3, 2018

There have been 17 trading days during October and November when the S&P 500 Index rose or fell by at least one percent (St. Louis Fed). To put that in perspective, the S&P 500 has averaged 50 such up or down days each year since 1950 (LPL Research). Last year, we participated in one of the least volatile years in decades, with just eight such moves.

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Slow Ride - November 28, 2018

Strong economic growth has given way to a hiccup in the current quarter.

  • Housing sales and housing starts are off the peak (U.S. Census, NAR).

  • Weekly jobless claims, a reliable leading indicator, remain low but has ticked higher (Dept of Labor).

  • A slowdown in global economic growth appears set to create headwinds for U.S. exports.

  • Trade tensions are adding to the uncertain mood.

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