Local markets no longer react to news solely within their particular country. US equities are affected by news from around the world as global interconnectedness continues to accelerate. Economies are now connected on a global basis and that connection will continue to accelerate.
There are four major global headlines that will impact markets around the world. There certainly are other news stories to consider but we believe these four will drive volatility and impact economic growth.
How the dissolution of the relationship between the United Kingdom and the rest of the European Union proceeds will be a concern for investors on a global basis. England is a major trading partner and its economic fortunes will impact companies domiciled in the United States. Additionally, if England successfully separates on an economic basis, it’s entirely possible other countries we’ll move in the same direction. This will have global economic implications.
The Chinese economy has grown impressively for the last 10 years. The country is now a major economic player; its fortunes and economic strength impact the rest of the world. If China’s economy continues to slow down, its ability to consume imports will be affected. There are already signs the Chinese economy is encountering headwinds. This is not good news for the overall global economy.
Trade between nations is a vital part of GDP growth for virtually every country in the world. Imports and exports between countries is widely monitored as an indication of economic growth. One only needs to look at the example of the United States and China to see the challenges that can arise from trade disputes. In an environment that is increasingly comfortable embracing tariffs and other retaliatory measures, the future of trade has never been more uncertain.
International headlines impact markets around the world including the United States. At present there are plenty of issues to be aware of. Concerns about North Korea’s nuclear ambitions remain high particularly given recent evidence that North Korea is not decelerating their attempts to build longer-range ballistic missiles. Uncertainty in France remains high as protesters riot in opposition to a proposed fuel tax. Germany’s future remains uncertain in terms of its political direction as Angela Merkel begins to wind down her reign as a leader of Germany. The Middle East continues to be a cauldron of uncertainty.
The impact on financial markets will continue to accelerate as the world grows closer together. One cannot ignore the uncertainty around the world and how it can affect investment strategies.
One might conclude that the landscape is simply too uncertain to successfully invest. It is true the environment is volatile. Still, the right strategy focused on a long-term financial plan can still be developed and implemented successfully. One must examine return expectations combined with risk profiles when investing portfolios towards specific goals.
At Destination Wealth Management, we believe investment strategies are most effectively designed when a goal is the foundation of the developed investment plan. Factoring in one’s comfort level with volatility is an important component of the development process.
We will continue to monitor global conditions and adjust portfolios accordingly. Our entire Research, Portfolio Management, and Trading team is committed to doing all we can to navigate this uncertain environment successfully.
If you have any questions about this information, do not hesitate to let us know. We are always here to help.