In the December issue of our monthly flagship publication, we feature:

  • On the Record by Chief Investment Officer Tony Roth, where he separates the signal from the noise—the useful from the irrelevant—in assessing the significance of the market’s whipsaw volatility of the last two months, and provides our outlook.
  • In Focus by Chief Economist Luke Tilley explores the subject of infrastructure, one of the seemingly few areas that both congressional parties agree is important, but the rub—and the question on which there appears to be little consensus—is how to go about funding this trillion-dollar initiative.
  • Investment positioning, major themes, and asset class positioning updates.

One of the most challenging aspects of investing is distinguishing signal from noise—or, put another way— separating useful information from the cascade of irrelevant data in the news on a daily basis. Doing so can be the difference between building long-term wealth and chasing short-term market returns. Over the past two months, the noise—everything from hyperbolic headlines to Trump tweets—has been particularly amplified by both the media and the market itself. Through this volatility, we advised our clients against making drastic moves in their portfolios and, as we go to press, markets seem to have stabilized again, leaving the S&P 500 index close to correction territory but still quite aways from bear market levels. Our forward-looking outlook calls for continued volatility with an upward drift in equity prices.

Two voices in particular have contributed to market volatility in the past few months: those of Federal Reserve Chair Jerome Powell and President Trump. On October 3, Chair Powell made comments interpreted by markets to mean that the Fed would be hiking rates more aggressively, risking inverting the yield curve and tipping the U.S. into recession. Shortly thereafter, President Trump and his closest confidants increased the pressure on China ahead of a meeting between Trump and Chinese President Xi to discuss trade issues. The administration made repeated, pointed threats about the likelihood of increased tariffs—from 10% to 25% on $200 billion of Chinese goods, and even tariffs on the remaining $267 billion of Chinese products imported to the U.S.—come the start of the new year. Understandably, investors were rattled.

But the last week of November provided new informational content that we think is being overlooked by markets. Recent developments may be short on substance but, in our expectation, will prove to be important signals that both Powell and Trump are more likely to be guided by pragmatism than principles in the year ahead.

Please see important disclosures at the end of the article.

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