Weekly Market Compass: The making of a classic suspense movie shows us that confidence can’t trump reality
One of my all-time favorite movies is “Jaws,” an iconic American summer movie about a great white shark that terrorizes a seaside New England resort town. Maybe it’s because I like the musical score, or maybe it’s because I like hearing my last name interspersed throughout the movie (a particularly noteworthy line is “Hooper drives the boat, Chief”), but I can be found watching the movie at least several times each summer.
As I write this, there is a significant market sell-off underway, as fears about escalating trade tensions have caused investors to panic. This sell-off should not come as a surprise to those who recognized that stocks were vulnerable because the market wasn’t fully pricing in trade tensions.
There is a famous Rolling Stones song that provides sage advice for demanding toddlers and spoiled teenagers — and perhaps financial markets: “You can’t always get what you want. But if you try sometimes, well you might find, you get what you need.”
As of July 1, the US business cycle has set a new record for longevity. It’s a significant milestone, to be sure, but what does it really mean for investors? The answer might not be what you think. To help put this cycle into context, I’m turning over this edition of Weekly Market Compass to my colleague Brian Levitt, Global Market Strategist for North America.
The Federal Reserve (Fed) met last week and clearly telegraphed that it will no longer be “patient”and that it is leaning toward loosening monetary policy. Why? Fed Chair Jay Powell said trade developments and global growth concerns are on the mind of the central bank. As I look into the second half of the year, those two items are key to my outlook as well — and I believe the willingness of central banks to become more accommodative could be a positive development for stocks.
All eyes will be on this week’s US Federal Reserve (Fed) meeting — especially the statement (whether the central bank will retain its “patient” stance) and the “dot plot” (which charts the outlook for interest rates). The June 18-19 Fed meeting is very important because market expectations have gotten so dovish recently. And with risks rising, many investors recognize that once again the Fed stands between them and a more challenging stock market environment.
A collective sigh of relief was expelled on Friday evening as US President Donald Trump announced he would indefinitely suspend the planned imposition of tariffs on Mexico — which was set to go into effect on June 10. Markets have entered “risk on” mode, given that the crisis was averted.
It’s the beginning of June, and I haven’t been this happy to welcome a new month in a very long time. I suspect many investors and market watchers have that same feeling. May was brutal for markets — but it was more than just that. The month of May was, in my opinion, a game-changer. So much happened that no one expected to happen: