We predict that 2018 will go down in history as one of the most volatile on record.
In late November 2018, the Dow Jones skyrocketed 617 points in a day. The NASDAQ gained 204. The S&P 500 was up 61 points. All thanks to easing trade war concerns and bullish commentary from the Federal Reserve.
However, on Tuesday, December 4, the Dow Jones plummeted 800 points, the NASDAQ fell 283, and the S&P 500 dropped 90 points. All as investors quickly realized the U.S. and China trade war is far from over. The tariffs already put in place still remain.
And should both sides fail to reach a compromise within 90-days, new tariffs could be implemented. “Yes, there is a halt in tariffs,” said Delores Rubin, equities trader at Deutsche Bank Wealth Management, as quoted by Bloomberg. But “we haven’t resolved anything yet.”
It also didn’t help that Larry Kudlow, Director of the National Economic Council, noted that if a deal with China is not reached within 90 days, the trade war will again escalate. In fact, the U.S. would increase tariffs to 25% in that event.
However, it wasn’t just the trade war news that buckled the markets.
Apple supplier, Cirrus Logic cut its earnings forecast for the holiday quarter.
The company cited “recent weakness in the smartphone market” for reducing sales to a new range of $300 million to $340 million. That’s down from the $360 million to $400 million forecast in early November 2018. It’s also below analyst forecasts for $367 million.
Another Apple supplier, Broadcom lowered its earnings forecast last week.
The housing sector took a hit, too after Toll Brothers posted earnings that are signaling softer fundamentals, too. In fact, it just reported its first fall in quarterly orders in more than four years, thanks to rising interest rates and higher home prices.
According to CNBC:
“The housing market has been a weak spot in a robust U.S. economy, with economists blaming the sluggish trend on rising mortgage rates, which have combined with higher prices, to make home purchase unaffordable for potential buyers. Sales of new U.S. single-family homes plunged to a more than 2-1/2-year low in October due to sharp declines across regions”
Despite recent negativity, we have to remember there are bright spots, too.
U.S. GDP came in at a better-than-expected rate of 3.5% for the third quarter.
The Bureau of Labor Statistics reported another 250,000 jobs in October 2018, which was way above forecasts for 190,000.
In addition, the number of employed Americans has never been higher at 156,562,000. Even wages and salaries rose 3.1% in the third quarter, the biggest increase in a decade, according to the Labor Department.
Consumer spending increased 0.8% in October 2018, exceeding the 0.5% estimate. Consumer sentiment remained strong in early November 2018, according to the University of Michigan report, as well.
And, a survey of consumer expectations by the Federal Reserve Bank of New York found that household income growth and spending expectations are increasing.
Still, despite that strength, it’s always good to safeguard your portfolio.
How to Protect your Portfolio at All Times
As we noted on November 26, 2018, there are five key ways to protect your portfolio. One of those ways is to keep cash on hand to purchase quality stocks when the market knocks them down to bargain basement prices.
You can view the other four key suggestions here.