The Tide - August 29, 2018

On a weekly, monthly, or quarterly basis, the ebb and flow of the tide will sway market sentiment. We see shares rise or fall in response to the tide.

Earlier in the year, the tide, or shorter-term risks, pulled on shares.

  • Trade tensions were a big concern, raising hurdles that blunted still-favorable economic fundamentals.

We’ve seen several periods in recent years when the tide turned against the bulls, temporarily putting up roadblocks.

  • China worries, geopolitical instability, Brexit, and European financial tremors were just some of the hurdles over the last nine years.

When the new risks failed to materially slow the economy and profit growth, favorable fundamentals have reasserted themselves.

  • It’s a shift in the tide.

Investor’s Corner

Market pullbacks, in the context of an expanding economy, have historically been healthy for stocks.

  • Market corrections put a lid on speculative euphoria.

  • Corrections allow for a consolidation of prior gains and help form the foundation for a new rally.

Though timing any upturn is difficult, the favorable fundamentals have historically reasserted themselves, as profit growth is the biggest medium- and long-term influence on stocks.

We are seeing that pattern play out today, with key indexes hitting new highs.

For long-term investors, a diversified portfolio that incorporates one’s tolerance for risk, as well other variables, have historically been the best path to one’s financial goals.