Alan Gayle

Stocks higher as summer begins. Will they hold through the dog days?

The S&P 500 rose an impressive 3.72% in July, supported by strong economic and earnings growth as well as a slight lessening in trade tensions. Via Nova’s outlook remains positive, but near term, the dog days of summer may weigh on stocks particularly in a mid-term election year.

REVIEW & OUTLOOK: STOCKS ADVANCED DESPITE HEIGHTENED TRADE TENSIONS

We believe the facts of a healthy economy and strong earnings growth justify a bias in favor of equities and away from bonds. However, less accommodative central bank policies and the potential for a trade war are tangible threats to an otherwise positive outlook.  Caution, not fear, is warranted.

IS THE MARKET BACK TO “NORMAL”?

HIGHLIGHTS

  • There was no place to hide in February.
  • Economic reports suggested accelerating strength.
  • Via Nova’s outlook for the stock market remains positive, but increased volatility could be the new normal.

 

"We also appear to be seeing three emerging forces that may prompt investors to temper their elevated expectations: accelerating inflation, a more aggressive Federal Reserve and a looming trade war."

STOCKS CONTINUED THEIR IMPRESSIVE PERFORMANCE IN JANUARY; CAN IT LAST?

KEY TAKEAWAYS

  • Overall outlook for 2018 is positive as the economy continues to recover and grow.
  • Risks include unexpected increases in inflation and faster-than-expected interest rate hikes.
  • Bonds may become a less desirable investment.
  • Near-term stock market weakness likely a buying opportunity.