Friends,
Let us review the performance of the U.S and international equity market now that we are close to the last quarter.
So far, the U.S. equity market has outperformed by a large margin any other equity market. We will use September 17th 2018 as a reference, it was the highest 2018 print before the largest drop in the fourth quarter of 2018:
The U.S. S&P 500 market index (SPY) was up +1.2% since September 17th, 2018, and +17% year to date
The developed markets (VEA) were down -7.5% since September 2018, and up +8.1% year to date
The emerging markets (IEMG) were down -5% since September 2018, and up +2.4% year to date
Heading to the last quarter of this year, the psychology of market participants will play a significant role. Everybody knows by now that a global slowdown is in progress.
But as usually happens in the last ten years, we just received synchronized messages from global central banks that they will step in to save us once more. They have recently acted easing interest rates, but it was not enough.
September and next quarter will be crucial to test this theory. The U.S., Europe, Japan, and China central banks will have an opportunity to show us their commitment to the cause.
We do not expect the impact of their actions will be as effective as in the recent past. In fact, we expect the impact of central banks actions will still be positive but with diminishing returns.
The big question going forward is whether or not those central banks will act promptly, with considerable impact and ingenuity. If they do respond appropriately, they will grant market participants a psyche boost and allow the market cycle to turn up again even with all its challenges.
Of course, central banks can not do all the work. We expect governments of every country to do more fiscal policy and seek mutually beneficial political understanding.
For more information, questions, or to review your portfolio, you can reach me at
michele.lopez@mellig.us or +1-786-953-0475 (Whatsapp) instagram : @mr_mklopez
Have a nice week!
- Michele López