August was a volatile month with stocks dipping over 6% from their highs. Bond yields fell sharply as the 30-Year Treasury yield fell below 2% for the first time on record. Taken on the whole, the markets have a dour outlook on the economy.
Escalating trade tensions triggered a sharp pullback in August, giving up July’s gains. Global stocks were up 16.6% YTD as of July 31, and now show 12.1% gains through August 6. Now is the time to re-evaluate your tolerance for ups and downs in the market. Get a plan, keep it simple, and stay invested. Those who can stick with a long-term plan will continue to be rewarded.
Almost no one predicted the surprisingly strong 2019 year-to-date returns for stocks and bonds. The stock market is currently indifferent about a trade war or recession, while declining long-term bond yields indicate the bond market takes a different view. Most things investors worry about are not really important. What is important are the four “deep risks.”
October lived up to its billing as the “worst month,” with the global MSCI All-Country World Index falling 7.5%, leaving the index down 4% for the year. US stocks, which had held up amid weakness abroad, fell 6.8% in October. Bonds, which usually zig when stocks zag, also saw selling pressure as interest rates rose.
The sharp 10% correction in stocks earlier in the year seems like a distant memory. Domestic equity markets regained new highs in the third quarter as the ongoing narratives surrounding shaky emerging markets, never-ending Brexit negotiations, rising interest rates, and trade tensions failed to dent confidence.