2nd Quarter 2019 Market Commentary
THE LONG-TERM BULL HAS BEEN TAMED
We still maintain our outlook for continued short-term volatility while our long-term bullish outlook has been tamed somewhat. My bullish outlook is not as strong as it was in the beginning of the year. At the beginning of the year I saw potential for a 20% rise in the markets based on our financial models and research. While I still believe we should see 3000 on the S&P 500 Index, I don't think the path is going to be as docile as it was in the first six months of the year. I believe market volatility will increase in the second half of the year. If the Federal Reserve lowers interest rates we could get a nice spike in the market followed by some volatility. Approaching a period of volatility could serve as a good opportunity to do a check on your portfolios and examine whether you're too aggressively positioned. If your time horizon and other variables indicate you should be allocated at a certain combination of equity and bonds, then this is a good time to verify that you're positioned appropriately for your goals and situation. There have been times in the last 25 years that it makes sense to take risk and invest very aggressively during a volatile time. I don't think this is one of those times.
Over the short-term, I think there's going to be more volatility due to the many potential market landmines that remain. There are still many international economic and political issues in addition to precarious trade deals being hashed out. Even though the U.S. and China trade deal has been particularly heated, I believe it will go in our favor once an agreement is finalized. America, along with the rest of the world, is encouraging China to grow their industries without stolen or unfairly obtained information. Many companies have complained of being coerced into, or required to, transfer intellectual property as part of doing business with China. And many countries have been speaking out to encourage China to change these practices. When President Trump and General Xi do finally announce a deal, it could spur a spike in the markets. However, it will still take a few months after the announcement to complete and enact any agreement. China may also play with the idea that they should delay negotiations until the next president in hopes that that person would be easier to negotiate with. In the end, international pressures and China's economic dependence on trade will result in an advantageous deal for America.
There are many situations over the next few months which I think will test the markets and cause them to react in more volatile way than usual. I am still bullish over the next couple of years but over the long-term I don't think the next 10 years are going to be as fruitful as the last 10. This is probably the first time in the last 10 years that I'm not as sanguine as I've always been, both over the very short-term and over the very long-term. One ray of hope is emerging market equities and Europe, which have languished for most of the last decade, could now start to shine. In general, domestic equity markets have done better than equities of other areas of the globe but I think we may be on the cusp of that changing for the upcoming decade.
The ever-changing market landscape is why we utilize a three-legged investment methodology including quantitative models, fundamental research, and technical research to provide a comprehensive approach for our clients. We will continue to monitor the market variables in order to carefully navigate the path for our clients.
 Office of the U.S. Trade Representative
Shashi Mehrotra, Chartered Financial Analyst, Senior Vice President and Chief Investment Strategist. The opinions and predictions expressed herein are those of Shashi Mehrotra solely and not necessarily the opinions or expectations of Legend Advisory or any of its affiliates. Such opinions and predictions are as of June 19, 2019, and are subject to change at any time based on market and other conditions. This material includes forward-looking statements that are subject to certain risks and uncertainties. Actual results, performance or achievements may differ materially from those expressed or implied. No predictions or forecasts can be guaranteed.
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