By Dustin Giannangelo
CEO Fusion Wealth Management
The combination of rising interest rates and bond yields, an escalation in the implementation of tariffs by the U.S. and China, next month’s midterm elections, debt concerns in Italy and the usual geopolitical strife has investors spooked for the time being, in our opinion.
As indicated in the charts, both the 2015 and 2018 corrections in the S&P 500 Index entailed initial 10% or more sell-offs followed by notable recovery attempts and then additional sell-offs. The average time it takes the S&P 500 Index to fully recover its losses from correction is four months.
Here are Five Data Points You Need to Know:
- As of Thursday’s close, 229 of the S&P 500 companies had reported third-quarter numbers and 81% beat earnings estimates on 26.5% growth, while 61% topped sales forecasts on 9.0% growth.
- The US economy continues to show strength. Real GDP grew at a 3.5% annual rate in the third quarter, the second straight quarterly reading at 3% or above. The economy looks like it will expand above a 3% rate in 2018. That hasn’t happened since 2005! At the same time, inflation cooled in the third quarter.
- So far, none of the domestic imbalances that typically precede recessions have developed: over-consumption, over-investment, a housing bubble or excessive wage growth.
- US economic tariffs are starting to work on China. China’s overall tariff level will be reduced to 7.5 percent in 2018 from 9.8 percent in 2017 as a result. Average import tariffs on over fifteen hundred products sold in China will be lowered.
- A stock market correction occurs when a benchmark index, such as the S&P 500 Index, posts a price decline of 10.00% to 19.99% from the most recent peak. Since World War II, the S&P 500 Index has experienced a correction, on average, about every 18 months, while the median time between corrections is just one year.
*Chart Source: Bloomberg, 10/25/2018
Past performance is no guarantee of future results.
S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Fusion Wealth Management is not affiliated with Kestra IS or Kestra AS.
