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Posted on OCT 16, 2019

Economic & Market Outlook – Fourth Quarter 2019

Uncertainty is the word on the street these days as investors seem focused on geopolitical risks. Despite that underlying disquiet, bonds, stocks and alternative investments have all posted strong returns so far this year with the S&P 500 plus 21% and bond returns of 5-6%.

This broad‐based positive performance masks the tension underneath the surface, which can explode into market‐moving trend reversals on little news. For example, recently two “winning” investment trends in 2019 experienced dramatic reversals when the relevant “story” changed:

  • Interest‐rate reversal: The yield on a 10‐year US Treasury Note had followed a long and steady decline from a peak of 3.24% in September 2018 to an eye‐popping low of 1.46% in late August—only to reverse course with a 44 basis point leap back upward to 1.90% in mid‐September.
  • Momentum stock reversal: At the same time, markets experienced a sharp three‐day reversal that temporarily drove momentum stocks out of favor as investors embraced value stocks instead. That short reversal closed the year-to‐date performance gap between the two styles from 12% to just 3%.

Click here to read the full report

What's critical to note here is neither of these reversals was triggered by new fundamental data about companies and their economic prospects. Rather, the driving force was an easing of the geopolitical uncertainty, as investors embraced a positive outlook about U.S.‐China trade. So, what's needed now?

We also have a short video featuring Johnson Financial Group's Jason Herried and Ron Alberts, that focuses on the:

  • Slowing economy
  • Fed rate cuts and negative yields
  • Early October decline in the stock market

Click here to watch the entire video

Any figures, opinions or investment strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of writing. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. Johnson Financial Group does not provide legal or tax advice to clients. Investors should make an independent assessment of the tax and legal implications and determine, together with their own professional advisers, if any investment strategy mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Investment strategies are customized for Johnson Financial Group clients and client portfolios may not reflect the asset allocations or strategy changes discussed in this publication. Past performance is not a guarantee of future results. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. Investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and investors may not get back the full amount invested. Non-depository investment products offered through Johnson Financial Group are not FDIC insured, not bank guaranteed and may lose value.