A brief note in follow-up to last week
It isn’t often that warnings come to fruition as quickly as we have seen over the last week. We did note in last week’s IM the potential for a market correction, based on high market valuations (P/Es), and a possible tightening of global interest rates more quickly than expected.
This scenario started to play out this week. Positive US economic data (especially unemployment) has raised the prospect of the inflation genie, which translates into the likelihood that the US Fed will increase rates more quickly and more often than had been expected.
2017 was a period of unusually low market volatility. And we got quite used to that. Therefore, the return of volatility this week has been unsettling. Furthermore, it has given the media a great opportunity for paper-selling headlines. But the bigger picture: the market movement over the last week has just taken the top taken off what has been a significant and extended period of market growth.
Your Investment Team retains its discipline, with the focus to turn to company profit reporting season next week (which starts with a bang – seven companies – instead of the normal trickle).