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Predictably, Unpredictable


US stock market performance has been muted so far in December as this weekend’s deadline looms for the U.S. to levy new tariffs on $160 billion dollars of Chinese goods.  The market’s reaction to the ongoing negotiations has been a constant in 2019, as investors try to digest new information and understand the ever-changing potential impacts.

This year alone has seen increased tariffs, a tentative truce reached, escalation threats, surprise tariff announcements, and the US declare China a currency manipulator.  And that was all in a three-month span over the summer.  While we expect trade negotiations will continue to drive market volatility, as they have over the past 18 months, it’s important to realize that the market is as unpredictable now as it has always been. We don’t have to look back far to prove that point.

At the end of 2018, when domestic stocks[1] had their first calendar year decline since 2008, we wrote the following in our year-end blog:

“While it certainly felt like a rocky year for US equity, going forward we fully expect equity volatility to continue to remain “normal” as it was in 2018.  The best way to capitalize is to remain disciplined to your investment plan and avoid letting emotion drive decisions.”

We’re glad to see that practicing what we preach has rewarded investors this year.  Despite the worries going into the year of a global pullback, positive economic news, strong corporate earnings, and robust consumer spending have led to US stocks reaching all-time highs this year, up over 27% for the year to date[1].  It’s a powerful reminder that playing the prediction game can be a losing one for investors.

Remaining disciplined to your investment plan by avoiding the urge to jump out of the market when times are rough can help best position your portfolio to meet your long-term goals.


[1] Measured by the Russell 3000 Index.  Source: Morningstar, Inc.