Volatility is going to be the new normal as we continue to get conflicting economic data. The market will continue to swing based on Fed comments, trade and geopolitical tensions. We currently recommend clients take a neutral to slightly below neutral equity weighting and are holding larger weights in cash, fixed income and alternative investments. For equity positioning, we are recommending blue chip companies that have high barriers to entry and predictable revenue streams even in slow growth economic conditions.
North American equity markets continue to be volatile and are churning at levels close to their recent highs. While the economic background remains positive, tariff wars, negative interest rates in much of the world, inversion of the yield curve and Brexit give investors lots to worry about. The environment they’re now facing is filled with elements never dealt with before. This variety of new market risks has resulted in forecasts by financial advisors ranging from “disaster and looming recession” to “we’re OK and equity markets are headed higher.” The truth is probably somewhere in between. In uncertain and volatile markets it’s appropriate to reduce risk. Diversification is important, which argues for ETFs that offer immediate diversification and are preferable to individual stocks until some of the risk currently in markets declines.