Economic muddling and market meddling
In our mid-year outlook, we expressed concern for market setbacks in the second half of 2019. Valuations had moved higher, forward-looking economic data had grown a bit wobbly, and trade frictions loomed large.
Since then, risks to the U.S. economy have increased. Our base case view is that we will not see a recession in the next 12 months as the impact of trade wars to the U.S. consumer is likely to be delayed. Nevertheless, higher multiples increase market risks at a time when the stamina of the expansion is waning. We expect equity markets to experience substantial volatility through the end of the year, and that credit spreads could widen modestly from historic lows.
Our latest market outlook update highlights key indicators we are watching and ideas for investing accordingly.
In short, we believe that equity valuations are stretched in several sectors, and we are taking less active risk in our portfolios as a result. In times of high volatility, it is important is that investors remain steadfastly committed to their goals. Timing economic and credit cycles is extremely difficult, and volatility is sure to be present. For long-term investors, it is appropriate to move toward a moderately more defensive posture, focusing on generating income across a broad range of sources without a wholesale abandonment of asset class targets.
High-quality securities that deliver income through consistent dividends and coupon payments can help them to weather the storm by relying less on price appreciation and extraordinary yield to add value.
This material represents an assessment of the market environment as at a specific date; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
This material contains general information only and does not take into account an individual’s financial circumstances. This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial advisor before making an investment decision.
“New York Life Investments” is both a service mark, and the common trade name, of the investment advisors affiliated with New York Life Insurance Company.