With a strong upward move in the final week of the month, November delivered a positive rate of return for financial markets. Helped by favorable trade tariff news and doubt the Federal Reserve would increase the target Federal Funds rate multiple times in 2019, the darkness experienced in the last three months was lifted. However, a slowing global growth outlook with moderating US corporate earnings may bring continued price volatility in risk markets as the markets reset.
Emerging markets led equity markets higher in November with a 4.1% returns, followed by US stocks up 2.0%. Bond markets were saved by unexpected Fed comments that their target rates were close to neutral, potentially limiting future rate increases. The late November comment by Chairman Powell brought the 10 year US Treasury Note yield to 3.00% at month-end. Fixed income credit markets (High Yield and Investment Grade) continued to weaken as global economic fundamentals trend toward slower growth. In Alternative asset classes, Real Estate was the leader, helped by lower interest rates.
Equity and fixed income markets have seen an increase in daily market moves as investors adjust positions in response to concerns for US/China trade tariffs, a weakening global economy and a flattening to inverted Treasury yield curve.
Investing is full of uncertainty and being prepared for the unknown is a good precaution. At Laurentide, we believe holding a portfolio that is appropriate for your risk tolerance and is also appropriate for the medium to long-term market outlook is a great way to manage uncertainty.
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John Kirby is a Principal and co-founder of Laurentide Advisory