New Year Market update

Happy New Year Everyone!

I thought I would provide you with a new year market update.  

In Q4 of 2018, markets faced a decrease in risk appetite driven by 3 reasons:

1. US Fed concerns of inflation;
2. Growing uncertainty regarding trade and domestic policy-making in the US; and
3. Market participants perception of lower US economic growth

The decreased risk appetite led to a decline of approx. 20 % in PE multiples, from 20 to 16, and reduced overvaluation in the US market. Sectors such as Tech, Consumer Discretionary, and Energy suffered the most significant drawdown.

Our 2019 market outlook:
While many media outlets continue to discuss an impending recession, there appears to be little data to support this thesis. Actions by the US Fed and the European Central Bank are unlikely to cause a recession as monetary policy continues to remain accommodative. I believe a recession in 2019 is unlikely for the following 3 reasons:

1. Credit markets are more attractively valued;
2. Inflation worries seem subdued; and
3. Lower oil prices are a powerful expansionary driver for all global geographies

Plan of Action: Stay the course