Hitting an Air Pocket at Cruising Altitude

After consistently posting positive returns over nine quarters, the U.S. stock market finally ran into some turbulence.  The markets were rocked when the president announced plans to impose trade tariffs on several types of products produced in China.  The uncertainty of how the tariffs will affect global trade and the possibility of a trade war that spirals out of control led many investors to reduce their exposure to equities.  From its record high on Jan 26, the S&P 500 Index dropped about 10% over a two week period.  For the quarter, the index ended down 1.2%.  The hardest hit sectors were telecommunications, consumer staples, and energy.

Despite the uncertainties of future trade policy, the underlying fundamentals of the economy and equity markets remain healthy.  The synchronized global expansion that is taking place will continue to benefit large multinational companies.  On top of that, the recently enacted tax cuts will certainly lead to better profit margins for U.S. companies.  Group W remains devoted to long-term investing and sees short-term volatility as an opportunity.

1 April 2018                                                                                                                                                                                         Group W Investment Management LLC