Bring the noise, it’s the last month of the quarter
Author: Kevin McCreadie
February 28, 2019
Equity markets have started 2019 on track for one of the best quarterly performances in a generation, but two months into the double-digit rally in stocks, now comes the tricky part: Month number three.
While no two quarters are exactly alike, there is a pattern to how each unfolds that often leads to a more speculative climate in the final weeks than is the case near the beginning.
Early on, for instance, earnings season takes precedent, offering investors tangible facts to act upon about the market’s underpinnings. However, once quarterly profits are reported, investors often find themselves in a “fundamentals” void and become more focused on macro events making daily headlines. Given the amount of noise that accompanies the modern day news cycle, this transition can easily breed uncertainty and contribute to more volatility.
The current quarter should be no different. Heading into March, there are a number of high profile stories that have the potential to change the direction of the markets from one day to the next.
Deal or no deal
This includes, first and foremost, the ongoing trade negotiations between the United States and China. Earlier this week, U.S. President Donald Trump agreed to extend the deadline to escalate tariffs on Chinese imports beyond March 1, saying both sides have made substantial progress in talks to solidify a new deal. China has echoed that sentiment but cautioned that some differences still need to be ironed out.
Clearly, this is a positive development for markets, which have rallied on the news, but kicking the can down the road is not the same as reaching a deal and news in the coming days that suggests negotiations are back on shaky ground would surely have a negative impact on stock prices.
The Fed vs. the Market
The U.S. Federal Reserve’s next interest rate announcement on March 20 is another date for investors to mark on the calendar. The Fed’s decision late last year to reign in future rate hikes has been one of the big tailwinds of the recent rally, but the U.S central bank is still calling for two increases in 2019, while markets expect zero hikes and even the possibility of a rate cut.
As such, investors should ready for plenty of talk over the next few days about what the Fed needs to do versus what it wants to do, and brace for disappointment if it doesn’t deliver quite what’s expected.
Should they stay or should they go now?
Additionally, investors have Brexit to worry about. At present, it looks more and more like the March 29 deadline for Britain to leave the European Union will be extended, but every day seems to bring some new wrinkle to the proceedings that could change the outcome and create more confusion for markets.
While the most likely scenario is for a “soft” Brexit deal sometime later this year, investors should not rule out the possibility of a much more problematic “no-deal” exit, nor the potential of a new referendum being held.
Kevin McCreadie is Chief Executive Officer and Chief Investment Officer at AGF Management Ltd. He is a regular contributor to AGF Perspective
The commentaries contained herein are provided as a general source of information based on information available as of February 27, 2019 and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication however, accuracy cannot be guaranteed. Investors are expected to obtain professional investment advice.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
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Written by
Kevin McCreadie, CFA®, MBA
CEO and Chief Investment Officer
AGF Management Limited
