Weekly Insights

Sep 06, 2019 | Ronald J. Wilcock


Share

September 5th, 2019 - Insights into the equity, fixed-income, currency and commodity markets from RBC Wealth Management.

Diane and I had a family pool party and barbeque at her sister’s house on Saturday, a lazy Sunday afternoon, and disc golf and paddle boarding on Monday; all in all a perfect unofficial last weekend of summer.

I hope you enjoyed yours as well.

 

Recently there has been some media headline furor, and I have received a few calls on the recession headlines. The following information is intended to give you some peace of mind on this.

In a nutshell it is the inversion in the yield curve (along with some trade war geo-politics) which have created this. I certainly don’t dismiss that later but, there are always geo-political concerns. It can be difficult to gauge what their effect will be and we have survived, yes even thrived through a number of them in the past. The former definitely merits more serious consideration. The US 3 month and 10 year treasury yields inverted recently but, it is the 2 year vs the 10 year that has our attention. This one has been going back and forth the last few weeks between inverting and un-inverting. This is the much more meaningful one. If you want to delve into the specifics yield curves please let me know. Otherwise, the main points to consider are:

- Every US recession over the last number of decades has been preceded by an inversion in the US 2 and 10 treasury yields.

- HOWEVER, not every yield curve inversion has been followed by a Recession.

- ADDITIONALLY, the timing of when it has been followed by a recession has been an average of 15 -18 months later.

- The FOMC (US Federal Markets Open Committee) or “The FED” has very recently begun reducing interest rates in the US. In 1995 under arguably similar conditions it is believed pre-emptively lowering interest rates averted a recession. After they started lowering interest rates in 1995, a recession did not appear until 2001.

- The last year (number of years) prior to a recession can provide some great gains in the markets.

- 5 out of 6 of RBC DS’s other Recessionary indicators are all still Green for Growth

 

With all this in mind, our view is to still give stocks the benefit of the doubt, albeit more cautiously, at this point. We have the most, and best analysts in the business and they are watching all economic indicators even more diligently than before. No one ever knows for sure but, we believe we are positioning our PIM portfolios correctly for the environment at the current time. We will continue to make any changes we believe appropriate.

 

Be assured you are in the best hands possible.

 

Now, hopefully we can enjoy the next few weeks of official summer as well.

 

Global Insight WEEKLY

The matters that matter

September 5th, 2019

 

Global Insight Monthly

A new phase

September 2019

 

My team provides a proven, comprehensive approach to wealth management for business owners and families. Should you know of any friends, family, or associates whom you think would benefit from our professional services, it would be my pleasure to talk with them to learn how we can help. Contact Us Here to be added to our Weekly Newsletter or to ask for a complimentary portfolio review.

 

This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are November 15, 2018 - Insights into the equity, fixed-income, currency and commodity markets from RBC Wealth Management.separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence. © 2018 RBC Dominion Securities Inc. All rights reserved.