Ideal Markets, Now What?

Ideal Markets, Now What?

Markets this year have been, so far, ideal for all kinds of investors. It seems that keeping a long-term horizon has outperformed all strategies, although short-term traders have benefitted as well. The three most important US indices, the Nasdaq, S&P 500 and Dow Jones, have had brilliant performance of 27.44%, 22.63% and 17.29% gains this year respectively.

Trade War

With only two months left of the year, “Trade War” fears have abated. On October 11th China and the US signed the first phase of a trade agreement and markets rebounded with optimism. While both countries still go back and forth on promises, only time will tell if they honor their word.

Brexit, The Never-Ending Story

Once again, the UK is trying to reach a final decision on how to proceed with Brexit. We must remember that the UK had until the last day of October to find a solution. Knowing this, Prime Minister Boris Johnson hurried a deal in mid-October hopeful to find support in Europe, but days later the UK parliament rejected the agreement.

This failure left Johnson with no other choice but to ask for a Brexit extension and a call for general elections on December 12th.

Latam Turmoil & Elections

On the other side of the Atlantic several Latin American countries are suffering instability. Surprisingly, from Chile to Ecuador, going through Bolivia, the civil and political unrest makes headlines. Additionally, Argentina voted for a new president, returning to those political views that were rejected 5 years ago. This new president faces major financial decisions in the next weeks to avoid an economic collapse.

While all this volatility around the world continues, Bitcoin had a busy month as a favored asset, with a considerable gain of 10%. On commodities, oil and gold remained stable this month, while the euro and the UK pound showed strong gains against the US dollar amid a 0.25% rate cut from the Federal Reserve.

Earnings & Records

Even though the US is in the middle of a presidential campaign and a possible impeachment to President Trump, the S&P 500 index reached an all-time high this month. Many companies with better than expected financial results included Google, Apple, Tesla, Facebook, Coca-Cola and Microsoft -trading at record high. Meanwhile, Amazon, McDonalds´s and specially Twitter, among others, disappointed investors. 

All in all, the US economy has been resilient to headwinds. Investors in US stocks can’t ask for more: low interest rates (and possibly going lower), record low unemployment, no inflation, corporate record earnings, and strong GDP. When does this party end?

“Although it’s easy to forget sometimes, a share is not a lottery ticket… it’s part ownership of a business.”

Peter Lynch

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