The rundown on the markets and what it means for you
Stock market volatility is back amid concerns around U.S. job market health, resets in investor positioning, and geopolitical dynamics.
Key drivers include: A rise in the U.S. unemployment rate, an unwinding of global currency and interest rate-linked trades, and uncertainties around tensions in the Middle East and U.S. elections. Considering these dynamics and the broader risk-off shift in sentiment, the Federal Reserve looks all but certain to cut interest rates come September – now, the debate is whether a -0.25% cut at that meeting will suffice, or if a -0.50% cut is necessary to stave off a deeper downturn (or even recession).
Our take: Risks feel more elevated than they did even just a couple of weeks ago, but we’re not getting carried away by the heightened nerves. A soft landing remains our base case and we think the volatility may be presenting opportunity across asset classes.
What this means for you: Historically, the average year that ends with a gain in the market comes with an 11% peak to trough decline. As of Monday’s close, the S&P 500 was about 8% below all-time highs. The point is that market volatility is normal and shouldn’t derail your long-term financial strategy.
Having a diversified investment portfolio means that your money is spread across a variety of investment types and assets, which can help reduce risk by smoothing out the variability of investment returns.
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