At First Western Trust, our investment strategy has always focused on a long-term outlook, coupled with a commitment to protecting against downside risk. This investment philosophy still holds true today. Our experienced investment professionals are supported by a dedicated investment research team that produces weekly and quarterly market commentary discussing notable events taking place in our global and domestic economies. This knowledge and insight helps guide us in our decisions for today and the long-term.
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Week in Review
Stay on top of important changes taking place in the global economy with insights into key events and economic factors impacting global and domestic markets. Click here to read the most recent publication of Week in Review, or fill out the form at the bottom of the page to receive this publication weekly.
Quarterly Economic Review
From valuations and volatility, to consumer sentiment and production, changes happen throughout every quarter that impact your portfolio. Our Quarterly Economic Review provides a timely look back at the marketplace and the key events that impacted quarter.
2Q 2018 Recap
After being largely absent in 2017, volatility returned with a vengeance to start the year. Fears of higher inflation, spurred by rising rates and a surprise jump in January wage data, resulted in the S&P 500’s first correction in two years.
Volatility was further exacerbated in March when President Trump announced a series of tariffs against China. Ensuing fears of a trade war between the world’s two largest economies led to the S&P 500 retesting its correction lows of early February.
Market volatility notwithstanding, U.S. economic data continued to point towards moderate, if not accelerating, growth. Unemployment remained at a 17-year low, consumer confidence remained near all-time highs, and manufacturing data set a new recovery record, spurred by robust business spending. And while fourth-quarter GDP growth slipped from 3.2% to 2.9%, underlying details were solid, supported by strong consumer spending.
Monetary policy remained in the spotlight as Jay Powell assumed leadership at the U.S. Federal Reserve. At its March meeting, the central bank raised rates by 0.25%. Speaking afterward, Powell intimated that the Fed could raise rates a total of four times in 2018 vs. the bank’s current forecast of three rate hikes.
International politics surfaced periodically during the quarter. After nearly six months of negotiations, Angela Merkel was finally sworn in for her fourth term as German chancellor. Brexit negotiations reached the one-year mark. Originally intended to be a two-year process, negotiators have agreed to a transition phase lasting until the end of 2020, ensuring that Brexit will remain in the headlines for the time being. Chinese President Xi Jinping moved to eliminate his two-term limit seemingly clearing the way for him to remain in power indefinitely.
Outlook- Entering 2018, we noted that the market was long overdue for 5-10% correction. Now that one has occurred, the obvious question is “What next?” Did the selloff signal the end of the current bull market, or was it merely a temporary pullback? From a fundamental standpoint, we would argue the latter. Corporate earnings growth remains strong and poised for further improvement; global monetary policy, while tightening, remains highly accommodative; and U.S. economic growth should receive a boost as the effects of tax reform materialize further. However, the threat of a trade war appears real, and its impacts could be significant depending on its severity. With so much “noise” surrounding the topic, discerning what matters vs. what makes good fodder for the TV talking heads—often two very different perspectives—can be difficult. For now, we are taking a wait-and-see approach, as we believe a trade war is ultimately not in the best interest of either country. As trying to predict the impact of a single risk factor is akin to trying to time the markets, we continue to advocate that investors remain committed to their long-term goals and a diversified portfolio.
1Q 2018 S&P500 Chronology
Volatility returned in the first quarter resulting in the S&P 500’s first correction since 1Q16. Fears of rising inflation and higher interest rates coupled the specter of a trade war, primarily with China, drove the volatility.
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