That’s the recent stock market action; up down and all around. Lately it seems that every day there is a change in direction. Also, sectors come in and out of favor almost as frequently. Much of this volatility has been induced by developments in the trade war with China. A month ago, the chances of coming to an agreement seemed high. Then suddenly negotiations seemed to have fallen apart. Since then, there are regular developments affecting future trade; increased tariffs, perhaps more products subject to 25% tariffs, business restrictions on doing business with certain companies, and the prospect of retaliation.
Another concerning development is the heightened tensions with Iran. After pulling out of the nuclear agreement, the United States has increased economic pressure. Iran has been kept out of the international banking system; oil exports have been severely restricted as well as those for some important industrial metals. In response, Iran has increased uranium enrichment and made direct threats to oil shipments through the Persian Gulf and to U.S. interests in the region.
With this background, it’s no wonder volatility has increased. Investors are trying to make assesments of value and opportunity at every turn; not an easy task. What may be more indicative is why isn’t volatility much worse. One reason is that business fundamentals are still excellent.
Another is that money flows into stocks are still strong. It seems that money from all over the world is seeking U.S. assets. That phenomenon has buttressed stock prices. With that, the Lonely Bull still believes higher asset values are in the offing; it just may take some patience as investors work through this period of heightened uncertainty. Stay steady, my friends.