There’s been a lot of financial talk lately. If you’ve read the headlines recently, watched the news or overheard friends and coworkers discussing the stock market and the friction between China and the United States, you may be worrying. So, I thought it was time for PAX Financial Group to give another update.
Again, I talked with Bryan Wing, our chief investment officer at PAX Financial Group, and I wanted to share with you what he said about some of the happenings regarding recent market activity.
The U.S. stock market suffered its first down month for 2019 in May. Now a great majority of this volatility can be attributed to continued trade tension between China and the United States. Higher import prices and the disruption of global supply chains as a result of tariff hikes could potentially damage the U.S. economy. Leadership from both countries were supposed to meet in June at the G20 summit in Osaka, Japan. Weather there was any progress made in trade negotiations has the potential to significantly move markets. But there’s a vested interest in both countries to make a deal happen.
According to BlackRock Investment Institute, China has evolved from being the world’s factory of cheap consumer goods to being an integral part of the global supply chain for a wide range of products, including sophisticated tech products. Now the deeply intertwined nature of global supply chains and other mutual interests have contained a full-blown escalation between the United States and China so far. The uncertainty of how trade negotiations will progress coupled with an expanding difference between interest rates of 3-month and 10-year treasuries are two factors that can potentially cause continued volatility in the markets. U.S. stocks did rally to start off the month of June, but it remains to be seen whether that momentum will continue or if market volatility will increase again.
So, what does one do when storm clouds are developing in the distance? Well, as Bryan reminded me, first, keep in mind that just because clouds form, it does not necessarily mean that rain will materialize. Keep focused on your long-term goals and maintain a balanced portfolio of investments. Storms come, but fortunately, storms also pass.
Bryan also shared with me some statistics about market activity in May.
While each of the prior four months of the year yielded positive returns in the U.S. stock market, May was a little bit different.
The S&P 500 was down 3.15 percent through May 24. Despite this pullback though, the S&P 500 was still up 13.67 percent. To put this in perspective, the long-term average of the S&P 500 is normally about 7 percent annually. This recent pullback is no reason to worry though. In fact, dating back to 1900, markets experienced corrections defined as at least a 10 percent drop from a peak at least once a year. So far for 2019, we have not had one yet. So, let’s not be surprised when volatility shows up from time to time.
However, the question is, if volatility is expected, what was driving this May bout of disruption?
Primarily it was due to this increased tension rising between the United States and China, which caused a selloff in higher-risk assets such as stocks and high-risk bonds. Earlier in May, the United States increased tariffs on Chinese goods, and China responded with their own increased tariffs on U.S. goods. Until a trade agreement is made between these countries, which make up the world’s two largest economies, this issue may continue to add volatility to global markets.
How do we weather the occasional market storm? Again, you need to keep your long-term destination in focus. Stock markets are volatile, but they are still one of the best ways to grow your money over a long period of time.
Talk with your financial advisor about your long-term goals and make sure that your investment allocation aligns with what you’re working toward.
We also encourage clients who can’t help but worry to attend one of our upcoming events. PAX Financial Group hosts regular workshops to discuss estate planning, Social Security and retirement. Keep checking our Events Page for new happenings.
Another way to stay informed is by reading our blog. We try to update it on a weekly basis, and you can sign up to receive a monthly roundup right in your email inbox.
This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.