Market News

Trade — this is what it is all about. We have watched as the stock market has swung from high to low over the past couple of weeks around rumors and actual developments from the ongoing trade war. Last week, we talked about the yield curve inversion and that, while it can be troubling, it does not by itself spell the end of the bull market. As of Friday, the S&P 500 Total Return Index is –5.7% off its all-time high. The index is still 4.2% above its lowest point in June. This is not bearish or even correction territory.

There are some truly difficult things happening in the world right now, and it is always challenging to parse out what matters and what does not. For example, last week the preliminary Markit PMI Manufacturing survey, a closely watched gauge of industrial activity, dipped its toes into economic contraction territory recording its lowest level since 2016. A couple of things to remember: first, this is a preliminary report that can be revised later; and, second, 2016 worked out ok. The stock market dipped, there were some serious troubles in international equities, but overall the dip proved to be short-lived and shallow.

It is important for us to understand how much risk we are willing to live with. News media hits us hard every day with numbers and statistics that do not matter but are told to us in a way to induce a response. So often they do produce a response, and we are worse off for responding.

This is one of the reasons that our main indicator is price level. In the end, the only thing that matters is what price level can you sell your securities at. It is important to stay informed about all the financial news, but we must always go back and compare our feelings and insights about the day’s events to what is actually happening in the market in terms of price. This is why we pointed out at the beginning of this section that the S&P 500 is down less than -6% as of Friday. This is the reality check that we put on ourselves when we are faced with a week like last week: a week where there was a lot of things said by a lot of people in high places. But in the end not much has changed.