1330 Orange Ave., Ste 302
Coronado, CA 92118
p: 619-319-0520
f: 855-691-0427
Read financial tips and market updates in our weekly newsletter
Copyright © 2002 – 2023 Orion Capital Management LLC • Coronado, CA
Disclosure: Orion Capital Management LLC (“Orion”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC). The firm offers advisory services in the State of California and in other jurisdictions where registered or exempted. Registration does not imply a certain level of skill or training. The information on Orion’s website or in its distributed commentary shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons or entities of another jurisdiction unless otherwise permitted by statute. Orion’s individualized responses to consumers in a particular state in the rendering of personalized investment advice for compensation shall not be made without the firm first complying with jurisdiction requirements or pursuant to an applicable state exemption.
The information on Orion’s website or in its distributed commentary is not investment, tax, accounting or legal advice. Orion is not a tax advisor. For tax advice individuals should consult their CPA. This information is also not an offer or a solicitation of an offer to buy or sell any security, or to be construed as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon in the making of investment decisions. All content on this site is for informational purposes only, and nothing herein should be construed as an investment recommendation. Opinions expressed herein are solely those of Orion, unless otherwise specifically cited. Material presented is believed to be from reliable sources, but no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas described on Orion’s website or in its distributed commentary should be discussed in detail with an investor’s personal financial advisors and legal counsel prior to implementation.
Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested.
The information on Orion’s website or in its distributed commentary is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, Orion Capital Management LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.
Testimonials or reviews on Orion’s website are from current clients. Orion does not compensate for reviews or testimonials and has no material conflicts with clients offering reviews.
Orion does not warrant that the information on Orion’s website or in its distributed commentary will be free from error. Your use of this information is at your sole risk. Under no circumstances shall Orion be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the information provided on this site, even if Orion or an Orion authorized representative has been advised of the possibility of such damages. Information contained on this site should not be considered a solicitation to buy or an offer to sell any security, or a recommendation to buy or sell any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
Schedule a quick introductory call with you and see if we would be a good fit for you.
A Crisis of Confidence
As the year winds down, investors are suffering a crisis of confidence brought about a confluence of factors that is seemingly causing a buyer’s strike in the markets. For the first time since 2008, all three major U.S. market indexes (Dow, S&P 500, NASDAQ) will end the year in the red. The declines for the year are mostly greater in international equity markets. Europe is down 13% and China (Shanghai Composite) is down 24%.
The recent market decline seems somewhat incongruous with the state of the real economy right now. While most economists are forecasting slowing growth for the U.S. economy in 2019, this notion is widely shared and hardly a surprise. After a transitory sugar high from this year’s corporate tax cuts and ramped up fiscal spending, it is quite reasonable to expect a moderate deceleration of U.S. GDP growth from 3.5% now to 2.0%-2.5% next year.
Contributing to investor hand-wringing is the news cycle we are in. After reporting record profits for the third quarter during the months of October and November, companies have not been saying much. With the exception of a very strong earnings report from Nike and robust nationwide holiday sales (up 5% year-over-year, the fastest growth in six years, according to Mastercard), there has not been much in the way of corporate news. Instead, the news cycle has been dominated by the Fed, White House and Congress, and it has dented investor confidence about 2019.
The current decline in stocks began in earnest after the Federal Reserve meeting on December 19th. As expected, the Fed, citing a strong economy, raised the Fed Funds Rate by 0.25%. However, investors apparently felt that the Fed was not giving sufficient credence to the recent market signals of a more pronounced slowdown to come. Higher interest rates have already caused a weakening in cyclical sectors such as housing and autos while inflation remains quiescent. The market seems to be viewing the Fed’s current rate hike forecast of one or two hikes next year as too aggressive for the economy to handle. Plainly, investors want to hear Fed Chairman Powell speak more directly to their concerns.
While the economy remains in good shape today, there is certainly a risk that stock market turmoil will spill over into the real economy and hurt consumer confidence, making the fear of a sudden economic slowdown a self-fulfilling prophecy. This week the Conference Board reported that its consumer confidence index had dropped this month by 8.3 points, pointing to a weakening in consumer sentiment most likely driven by stock market volatility, a sour tone in Washington DC over the Federal government shutdown, President Trump’s criticism of the Fed and uncertainty about the course of trade talks with China.
U.S. equities are trading at their most undemanding valuations in years. With indexes down for the year and corporate earnings up a very robust 20%, stocks are essentially 25% cheaper than they were a year ago relative to their earnings. For markets to get back on track in 2019, in my view, investors will need to see a continuation of strong corporate results, perceive some progress on trade and hear a more dovish tone from the Fed. Headway on any of these issues would likely give investor sentiment a nice boost.
Please don’t hesitate to get in touch with me if you would like to discuss your portfolio or the markets.
Share This!
Join Our list!
Join our email newsletter list to receive more market updates and financial articles like this one.
The Fed and Jackson Hole
Fed to Present Update at Jackson Hole on Friday In the year since Federal Reserve Chairman Jerome Powell’s last speech
Soft Landing Back in Play
Soft Landing Hopes Rising A “soft landing,” a scenario in which the Federal Reserve tames inflation through interest rate hikes
Markets Calm Amid Crosscurrents
Both stock and bond markets seem to be taking today’s many conflicting financial and political cross currents in stride, with
Peter Thoms, CFA, MBA