Equity markets worldwide have seen an extreme bout of volatility over the last week and several indices have entered into correction territory. The catalyst for the downside move appears to be two-fold: China’s recent decision to devalue its currency and anticipation for an interest rate hike by the Federal Reserve. China’s call to allow the value of its currency float more freely was a pretty marked shift from its previous position of being pegged to the value of the U.S. dollar. The result was a steep devaluation of the Chinese yuan in relation to other currencies. Many market participants view this as an indication of a rapid slowdown in growth in China. Back home, the minutes from the most recent Federal Reserve meeting indicated that while most voting members need to see more improvement in inflation data to support a rate hike, those conditions are becoming closer and closer to reality. Odds of a September rate hike had been falling in recent weeks with probabilities shifting toward December, however that came into question given the minutes from the meeting.
Those two reasons aside, it is our opinion that the longer term strategic outlook for the markets is largely unchanged despite recent market volatility. Moderate global economic growth and still accommodative monetary policies appear to remain intact, however volatility and downside moves may continue until more clarity is achieved on both fronts. Domestically, the economy appears to be on solid footing as recent employment and housing data remain strong. Additionally, consumers should continue to benefit from lower energy prices, providing a boost to retail activity.
If you have any questions or concerns, please do not hesitate to contact an Investment Officer or your Relationship Manager.
Rich Gartelmann CFP® – (630) 844-5730 firstname.lastname@example.org
Jean Van Keppel CFA® – (630) 906-5489 email@example.com
Brad Johnson CFA®, CFP® – (630) 906-5545 firstname.lastname@example.org
Joel Binder, SVP – (630) 844-6767 email@example.com
Jacqueline Runnberg CFP® – (630) 966-2462 firstname.lastname@example.org
Tamara Wiley, CFP® – (630) 844-3222 email@example.com
Ed Gorenz, VP – (630) 906-5467 firstname.lastname@example.org
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