Market Volatility: Update

December 4, 2018

Market update

Following a strong day in markets on Monday based on comments made by the President of the United States at the G20 meeting that seemed to indicate a lessening of trade tensions between the U.S. and China, markets slumped on Tuesday on fears that there was no meaningful progress made.

This, together with concerns over the durability of global growth and the inversion of U.S. three-year and five-year interest rates, where for the first time in more than a decade three-year rates are higher than five-year rates, conspired to send the S&P 500 along with the Dow Jones Industrial average down more than 3% for the day. The S&P/TSX in Canada fared somewhat better down 1.38% on the day.

All of this comes against a backdrop of rising interest rates and an imminent slowing of corporate earnings growth. As more economic and market sectors feel the pain, from stocks to bonds to oil to bitcoin, increased caution on the part of investors is understandable.

It is worth repeating what we highlighted in recent updates – that fourth quarter seasonality is a strong force in North American markets and historical post-election market trends also suggest stronger equities in the months ahead. Since 1946, the S&P 500 has never failed to gain ground over the 12 months following a midterm election. As always, focus on your long-term objectives and stay disciplined. Time in the market, not timing the market, is what builds wealth.

This is just a market update. Don't use this to do something stupid.

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