Super Bowl Sunday on Wednesday

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Federal Reserve Chairman Jerome Powell left nothing on the field at Wednesday’s Federal Open Market Committee (FOMC) meeting. He discussed patience when it comes to interest rate hikes and acknowledged the potential economic downside risks due to the global slowdown, especially in Asia. First down! He then went a giant step further and discussed possible adjustments in the balance sheet reduction. Touch down! The hawks were sidelined and the market went wild.

For quite some time, investors have been worried about an aggressive Fed, trade turmoil and the slowing global economy. While trade and global growth remain worrisome, the Fed does not. The Fed’s pivot toward a decidedly more dovish stance, coupled with earnings reports that so far have been much better than feared, provided the bench support investors needed to move the market up 1% in a day. The S&P 500 is up ~7% this year, not a false start but not exactly an all clear either. Investors should expect volatility to continue to vex markets.

Fundamentals are strong even though U.S. earnings expectations for 2019 have pulled back amid European and Chinese economic “off-sides.” Though the U.S. economy is moving downfield solidly, investors will still need to tackle higher rates and tighter monetary policy in a low growth world. Global diversification, incorporating both stocks and bonds, may potentially help your game.

Please see an example of global diversification on page 5 of the Global Perspectives book.

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