KING OF PRUSSIA, Pa.,
April 9, 2019 /PRNewswire/
-- Markets continue to look past weaker global macroeconomic
readings to potential better performance in the back half of the
year, according to the Investment Insights issued today by BNY
Mellon's Lockwood Advisors, Inc. ("Lockwood").
Since the fourth quarter, such global growth concerns have
lingered, according to the report, even as markets recorded a
V-shaped recovery, with the S&P 500® Index posting
its best first quarter since 1998.
"Markets are waiting for answers to questions about trade
relations between the U.S. and China, Britain's plan to exit the European Union,
negotiations between the U.S. and North
Korea, future monetary policy decisions, as well as further
data points on U.S. and global growth," said Matthew Forester, chief investment officer at
BNY Mellon's Lockwood Advisors and the author of the report.
"While the equity market has moved higher even in the absence of
such clarity, the bond market has been telling a different story,
with a recent inverted yield curve spooking fears of an oncoming
recession," Forester added.
Highlights from the report include:
- The market's response to Fed's quest for data
Markets have interpreted the
Federal Reserve's (Fed's) dramatic about face on monetary policy in
a dovish manner, and have taken prospects for future policy rate
hikes substantially lower. At times, markets have even priced in
cuts to the policy rate by the end of the year.
- The bond market has grown impatient
Bond markets have clearly signaled
they believe the Fed is too tight on monetary policy and should
reverse course. The recent volatility in Treasuries after one of
the calmest periods on record shows a growing market fear that
cyclical pressures on the U.S. economy are rising rapidly.
- Recession watch is underway
The difference between the yield
on 10-year and 3-month U.S. Treasury rates could steepen again
before inverting, as it did twice before the shallow recession that
accompanied the burst of the tech bubble in 2000 to 2001. While the
lead time for a possible recession could be measured in quarters,
even years, rather than months, the probability of an economic
downturn in the intermediate-term has increased.
- A case of seasonal effects
For most of the past 15 years,
U.S. economic growth has followed distinct seasonal patterns. Data
from the St. Louis Federal Reserve shows the first and fourth
quarters typically lag the growth numbers posted in the second and
fourth. While markets are looking past this data point, it could
exacerbate eventual adjustments to analysts' earnings estimates if
cyclical factors flare up at the same time.
- The atmospheric blame game
The V-shaped recovery in the
equity market is unusual. While a re-test of the December lows may
still occur, there are a series of one-time events that optimists
can point to. As the market shifts its focus to first quarter
earnings reports, expect management teams to mention the impact of
weather effects, including record rain and snowfall, early and
often.
- Extra vigilance is warranted
Macroeconomic data, fundamentals
and earnings estimates may be shifting. Navigating these market
dynamics successfully over the next few years might depend on
ensuring that risk budgets are aligned to longer-term goals and
that advisors have realistic expectations for potential near-term
volatility.
For more information on these trends, please
visit www.lockwoodadvisors.com to view the full report and
relevant disclosures.
This material is intended for informational purposes only and
does not constitute investment advice or an offer or solicitation
to purchase, hold or sell any securities. The opinions expressed by
Lockwood are as of April 2019, and
may change as subsequent conditions vary. The information and
opinions contained in this material are derived from proprietary
and nonproprietary sources deemed by Lockwood to be reliable, but
are not necessarily all inclusive. This material may contain
forward-looking information that is not purely historical in
nature. Such information may include, among other things,
projections and forecasts. There is no guarantee that any forecasts
made will come to pass. Reliance upon information in this material
is at the sole discretion of the reader.
About BNY Mellon's Lockwood Advisors, Inc.
BNY
Mellon's Lockwood Advisors, Inc. is a leading provider of managed
account solutions. As a program sponsor, Lockwood offers access to
some of the industry's leading investment managers, provides
research on separate account managers, and develops advisory
solutions to help investment professionals meet the diverse needs
of their clients. Lockwood also offers discretionary portfolio
management solutions through financial institutions and independent
registered investment advisers. Lockwood Advisors, Inc. is an
investment adviser registered in the
United States under the Investment Advisers Act of 1940, an
affiliate of Pershing LLC and a subsidiary of The Bank of New York
Mellon Corporation (BNY Mellon).
About BNY Mellon's Pershing
BNY Mellon's Pershing and
its affiliates provide advisors, broker-dealers, family offices,
hedge fund and '40 Act fund managers, registered investment advisor
firms and wealth managers with a broad suite of global financial
business solutions. Many of the world's most sophisticated and
successful financial services firms rely on Pershing for clearing
and custody, investment and retirement solutions, technology,
enterprise data management, trading services, prime brokerage and
business consulting. Pershing helps clients improve profitability
and drive growth, create capacity and efficiency, attract and
retain talent, and manage risk and regulation. With a network of 23
offices worldwide, Pershing provides business-to-business solutions
to clients representing more than seven million investor accounts
globally. Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon
company. Additional information is available on pershing.com, or
follow us on Twitter @Pershing.
About BNY Mellon
BNY Mellon is a global investments
company dedicated to helping its clients manage and service their
financial assets throughout the investment lifecycle. Whether
providing financial services for institutions, corporations or
individual investors, BNY Mellon delivers informed investment
management and investment services in 35 countries. As of
December 31, 2018, BNY Mellon had
$33.1 trillion in assets under
custody and/or administration, and $1.7
trillion in assets under management. BNY Mellon can act as a
single point of contact for clients looking to create, trade, hold,
manage, service, distribute or restructure investments. BNY Mellon
is the corporate brand of The Bank of New York Mellon Corporation
(NYSE: BK). Additional information is available on
www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our
newsroom at www.bnymellon.com/newsroom for the latest company
news.
Sanuber Grohe
+1 201 413 2247
sanuberbilguvar.grohe@pershing.com
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SOURCE BNY Mellon