Broker Check

Fourth Quarter 2019 Investment Outlook

October 14, 2019
Share |

The plunge in bond yields has been the major story of 2019 to date. We are now in what we would call a “Wild, Wacky Investment World” (WWIW) where a significant number of global stocks have dividend yields higher than the vast majority of bonds.

At the same time, corporate earnings fundamentals continue to deteriorate and earnings expectations for 2020 appear too high in the context of a slowing global economy. Despite some signs of progress, the U.S / China trade war continues with a negative impact on the global growth outlook and business confidence.

Stock valuations, especially in the U.S, are not cheap, but the collapse of bond yields makes stocks attractive on a relative basis and in the context of limited options for an investor looking to maximize returns. If the Fed continues to cut interest rates, yields on money markets (cash) will decline and bond yields at today’s low and even negative levels make the risk/reward setup for bonds increasingly less attractive. Central banks appear determined to try an arrest the latest slide in global economic growth. If they are successful and global growth stabilizes and improves, then bond investors will likely face the prospect of negative returns ahead.

An important unanswered question is how much can additional rate cuts really stimulate economies when existing rates are already at historically low and negative levels?

The current investment environment is fraught with difficult choices never-before faced by U.S. investors and it does not look to get any easier. Unfortunately, the WWIW may be with us for some time.

To read the full report please click on this LINK

PLEASE NOTE: ABSOLUTELY NOTHING IN THIS ARTICLE SHOULD BE CONSIDERED AS INVESTMENT ADVICE OR RECOMMENDATION REGARDING THE SUITABILITY OF ANY INVESTMENT. FOR MORE INFORMATION PLEASE REFER TO DISCLOSURES.