On July 2nd, 2018 I sent an email message to the members of the W. Swartz & Co. Private Client Group regarding the current market conditions and global macroeconomic environment. Below is that message.

Hi friends,

We are halfway through 2018 and I imagine that many investors are looking at capital markets with frustration and fear. When markets behave like they did these past two quarters investors start to get “the itch,” that feeling that says, “we need to change something.”

It’s human nature to crave a sense of control. One of the ways we typically gain that sense is through action, but when it comes to investing the best action is inaction.

In 2017, global markets returned ~+25% and had historically low volatility. With the combination of high returns and extremely low volatility last year investors should have pared back their 2018 market expectations. Over the next few weeks I will start to get more and more updated data on economic forecasts moving forward and how the numbers played out in 2Q. We can make a better assessment as this information comes out.

In the meantime, a few thoughts…

1. Markets have had a correction, which is normal, and a big uptick in volatility. This was expected.

2. Despite a lot of strong upward and downward moves, markets are basically flat for the year. This shouldn’t be a surprise.

3. 1Q & 2Q18 saw headlines & sentiment move markets, especially those coming from the White House. This is nothing new, even if the speed of reaction is faster than ever before.

4. Economic data looked good going into 1Q and 2Q, and the chance of recession looked low. Let’s see what the new numbers look like the next couple of weeks.

5. Lastly trade wars are bad, and nobody wins. Global trade wars could drastically change economic forecasts, & corporate earnings forecasts, and lead to a global recession. Hopefully the trade wars talk is all bark and no bite.

Adam Smith the father of classical economics believed that the ingredients for prosperity were:

1. Limited government that grows at a lower rate than the private sector

2. Low tax rates

3. Stable currency and property rights

4. Freedom… Free Market Capitalism

In the United States and abroad, we see conflicting forces. Will the good forces outweigh the bad?

2018 Year-to-date VT Chart:

Wyatt Swartz

Message sent to members of W. Swartz & Co. Private Client Group on July 2nd, 2018.

– Wyatt Swartz

– Blog Post 7/3/2018