In early June the market is struggling. The trade war with China continues, and perhaps is just beginning with Mexico. Tariffs are not good for economic growth, and if continued, will eventually translate into higher consumer prices and/or lower earnings for the major companies in our stock indices. Investors are acting now - selling, and asking questions later, causing the market to have the weakest May in years. The darlings of the tech sector – Amazon, Apple, Facebook, and Alphabet (Google) are facing anti-trust inquiries. We still like all these stocks.
Still, the market is up over 9% (S & P 500), and up over 6% (DJIA) for the year to date. Perhaps this is because the economic data remains positive. Unemployment is below 4%, inflation is about 2%, consumer confidence is high, and interest rates are falling from already low levels. Perhaps this is signaling recession is coming, but we’re not so sure. The market’s valuation at about 15 times 2019 expected earnings is not excessive. In 2000 it was about 30 times.
Should we get some signs of an imminent trade “deal”, the market can move higher given the above backdrop. But with the political rhetoric heating up, the international economic outlook still weak, and the President’s penchant for market moving tweets, volatility will remain elevated. It’s always prudent to keep cash on hand but we are a little more optimistic with the market down about 7% from its high. For example, despite the low interest rates, it is still possible for income investors to earn 4-6% on a diversified portfolio that offers some growth potential as well. Please contact one of our friendly advisors for more information or a no obligation portfolio check-up. We also offer a portfolio management service at a very competitive rate. See the “Portfolio Management” link on this site.
Prices and yields as of June 3, 2019. The above information is believed to be reliable but is not guaranteed to be accurate. Investors should check every investment for suitability for his or her particular needs. Investing in stocks is risky and you could lose some or all of your investment. First Georgetown Securities, Inc. will furnish available investment information supporting recommendations upon request. Of the above-mentioned securities, the author maintains personal positions in Apple (AAPL), Alphabet (GOOGL), Facebook (FB), and Amazon (AMZN).