Rocky start to new year is no surpriseJanuary 5, 2016
U.S. stocks got off to a rocky trading start in the new year, buffeted by continuing concerns over global economic slowdown, yesterday's drop in Chinese stocks, downward pressure on energy prices and increasing political tensions in the Middle East. Markets are unsettled and may remain volatile as these developments play out. Even though downside risks to global growth exist, our expectation is that these impacts will be manageable and not enough to derail the U.S. economy's upward, albeit slow, general trajectory.
Key takeaways this week:
- Overvalued equity markets can lead to 3% to 7% corrections almost anytime.
- U.S. financial markets are still strongly influenced by the economic slowdown in China.
- Political tensions intensifying in the Middle East are affecting the U.S. economy.
- Past performance is no guarantee of future results, and the opinions and other information in the investment commentary are as of January 5, 2016. This summary is intended to provide general information only and is reflective of the opinions of The Commerce Trust Company Investment Policy Committee. This material is not a recommendation of any particular security, is not based on any particular financial situation or needs, and is not intended to replace the advice of a qualified attorney, tax advisor or investment professional. Diversification does not guarantee a profit or protect against all risk. Commerce does not provide tax advice or legal advice to customers. Consult a tax specialist regarding tax implications related to any product and specific financial situations. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. All expressions of opinion are subject to change without notice depending upon worldwide market, economic or political conditions.
History dictates that interest rates will not stay low forever, but the speed at which rates rise and how far up they climb is difficult to predict.
The Federal Reserve Board (Fed) has been telegraphing a rate increase for some time now so it seems like the question is no longer "if", but "when". Nick Fafoglia, CFA®, a senior Investment Portfolio Manager at The Commerce Trust Company, takes a moment to address the impact of the impending Fed action and the potential impact on stocks.