Wednesday, July 10, 2019

Investment Perspectives: Spiking the punch bowl, the next economic downturn, and second-half surge

Key Takeaways
• Seeing a clear direction of the economy continues to be the Fed’s challenge
• The Great Recession still haunts investors. Read why the next downturn might not be as severe.
• Stocks posted a strong first half of 2019 but many are wondering if the streak can continue through the second half of this year.

In this month's issue:

Spiking the punch bowl - Mark Luschini
The Federal Reserve’s monetary evolution during the past six months has moved from tightening to an easing bias. The decline in stock prices in last year’s fourth quarter caused a meaningful decline in household wealth, a widening in bond spreads heralding higher debt-service costs for corporations and consumers, and a surge in mortgage rates causing would-be home buyers to pause. With the tightening in financial conditions that occurred, additional hikes would have amounted to piling on, so the Fed opted instead to move to the sidelines.

The next economic downturn - Guy LeBas
Economic PTSD (post-traumatic stress disorder)—the term we use to describe market participants and consumers’ fear that the next recession, whenever it comes, will be as bad as the 2007-2009 experience.

Second half starts with surge. Will it last? - Greg Drahuschak 
There was no “June Swoon” for stocks this year, but July could tell a different story. The S&P 500 produced the second-best result for June since 1949 (up 6.89%) and set a new all-time high. All 11 S&P 500 sectors posted gains, as the equity market posted its best first half of a year since 1997.

You can read the full Investment Perspectives here.