September 2019 Market Update
Same Record, Different Song
In September, U.S. equity markets reversed the prior month’s losses to finish positive for the 3rd quarter. Same record (trade and the Federal Reserve) but different song—this one more upbeat. Trade tensions cooled somewhat with the emergence of hope for a phase 1 deal that would serve as a cease fire to facilitate discussions of the more contentious matters. Meanwhile, FOMC officials lowered interest rates again and laid the groundwork for further cuts. These events were welcomed with open arms by investors, with the S&P 500 gaining 1.87% in September. The market bounced back and forth throughout the quarter, with August declines wiping out July gains, only to recover in September.
The rapid movements in equity markets demonstrate the risk still belying this year’s run-up, and supports our case that caution and patience with risk assets are justified in this uncertain environment. When on offense, we are willing to ride out market corrections and wait for an indication of higher risk levels before we exit. Likewise, we will sit out rallies while on defense, awaiting a higher degree of confidence that we are out of the woods and safe to re-enter. To minimize damaging losses that take years to recover, we have developed our tactical model to work gradually. It allows us to reduce the frequency of defensive shifts. Our long-term objective requires a patient and disciplined approach to achieve over a full market cycle.