Tuesday, April 3, 2018

CIO Monthly Market Outlook - April 2018

Mark Nickel
Author position
Chief Investment Officer

With Volatility Comes Opportunity

The old adage of “April showers bring May flowers” offers a level of comfort as psyches grow weary of weather conditions that often accompany the early months of each year. From lake-effect snows to thunderstorms in the Southeast and Nor’easters along the East Coast, most Americans have reason to look forward to longer days and milder temps. Embedded in our noted quip is an idea that periods of tumult or discomfort can precede, or cultivate, future growth.

Similar to the way April rains provide nourishment for a subsequent abundance of nature, upheaval in financial markets can often yield opportunity for investors. Volatility returned to financial markets in February and persists as we work into April. But amid these stormy conditions, the Investment Strategies Group (ISG) believes select investment opportunities have become more compelling.

A shakeup in markets remained a key topic at this month’s ISG roundtable, with conversations on tariffs and trade rhetoric the most pressing new theme. Recent trade-related headlines present a range of negative scenarios, but ISG does not believe a “trade war” will develop. We further note that fiscal items in the United States (that is, tax cuts) are likely to have far more impact than selectively applied tariffs. The roundtable was sanguine toward US economic data; one particularly strong recent data point was the February Jobs Report, with over 300k jobs added.

As ISG has noted before, reliance on passive investment selection (i.e., index funds) increases market sensitivity to its largest stocks and could exacerbate future volatility. Seven of the 10 largest global companies are now in the growth-oriented Tech sector, a leadership group that faded in March. Nonetheless, 2018 EPS exceptions for the S&P 500® expanded slightly over the last month, and we see a possible transition of style/sector leadership as offering current opportunity.

Amid potentially fading Tech leadership, we are reemphasizing the importance of exposure to value-oriented stocks, and we keep a constructive outlook toward energy and commodities; each have under-performed this cycle. Good relative value remains internationally as well, in our view, and we are actively coordinating with your Wealth Advisor to identify specific products that reflect these themes.

It would be nice if stormy financial markets followed as regular a pattern as April showers prompting May flowers. That said, we believe current tumult is working in our favor to yield opportunities that your Wealth Advisor is equipped to help you capitalize on, within the context of your individually tailored financial plan.


Name To Know For April

Xi Jinping -  President of People’s Republic of China

Xi Jinping (pronounced: she gin-ping), 64, holds a range of titles across the Chinese government and Communist Party, but effectively, he is China’s Head of State. Xi is of note this month as the Trump Ad-ministration works toward an official meeting with North Korea, given China’s interest in the Korean Peninsula. Economic progress and reforms under Xi have typically been viewed favorably from abroad, although his successful push in March 2018 to remove presidential term limits drew ire.


Important Information about This Newsletter
Each client’s investment needs, risk tolerance, and goals are different. This newsletter is not meant to be advice for any specific investor. Nothing in it should be construed as an offer to sell, or a solicitation of an offer to buy, any securities. This should not be used as the sole basis for an investment decision. Any opinions or estimates are subject to change without notice. For information about how any of this information applies to your personal financial situation, please contact your Wealth Advisor.
Past performance is not a guarantee of future results.
Although the information provided to you in this newsletter was obtained or compiled from sources that we believe are reliable, J.J.B. Hilliard, W.L. Lyons, LLC cannot, and does not, guarantee that the information or data is accurate, timely, valid, or complete.

All investing involves risk, including the possible loss of principal. You should carefully consider investment objectives, risks, charges, and expenses of any investment before investing. Diversification and asset allocation do not guarantee a profit or guarantee against a loss. Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market or economic developments. The bond market is also volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect can be more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks.