A theme for the third quarter of 2018 could be summarized as trade tensions, plus a strong dollar and rising interest rates, equals uncertainty in most markets. The U.S. market was positive, and most international markets were negative for the quarter. This was primarily due to the tax cuts and the overall deregulation in the U.S., coupled with a strong economy which has propelled individual company earnings in excess of 20% per quarter.
The fourth quarter and into 2019 the economic expansion, which is the second longest on record, is widely expected to continue. The pace of this growth will likely moderate, but continue in the 2.50% to 3% area.
While we are experiencing more volatility as of late, we feel the long term secular bull market remains intact. Continued fears of tariffs, the outcome of the mid-term elections, as well as a general drop in overall liquidity in the markets (due to the Federal Reserve moving from an accommodative posture to a restrictive policy) are likely the culprits.
We remain positive on the U.S. markets but understand while valuations are not excessive, they could put a ceiling on future returns. We are more positive on the international markets from a valuation standpoint, and their upside is significant over the next 5+ years. However, we remain cautious as to the timing of being invested in those markets.
All in all we are positive and committed to a globally-diversified portfolio and are constantly looking for opportunities to improve returns.