The U.S.
We have been noting for some time that the U.S. market, after weeks of strength, would be susceptible to a modest correction of 1–5%, which may now be underway. As often seems to be the case, the news — in this case, President Trump’s pressure tactics ahead of a December 15 tariff deadline — seems almost to serve as an excuse for what the market wanted to do anyway.
In any event, we note that years as strong as 2019 have rarely ended poorly, so we would regard weakness here as an opportunity to increase exposure to favored themes. Last week we noted that there may be a scramble both for the year’s winners (so that managers can show them in their portfolios at year-end) and for the year’s laggards, such as healthcare, where politics and sentiment may have unduly punished them.
The broad environment remains one of a supportive Fed, low inflation, and moderate economic growth, with the prospect of a bottoming and growth re-acceleration in the new year. Credit conditions remain unstressed and the U.S. consumer remains strong. We do not see the rationale of imminent recession fears.
Outside the U.S.: Developed and Developing Markets
Soft data, such as PMIs, are showing improvement in many areas. We believe the likelihood of imminent improvement in hard data is rising. With the possible exception of long-term strategic themes, such as India, the U.K., or Japan, where we would not have a major allocation, we believe the U.S. is still “the best game in town.”
Gold
As we have noted over the past few weeks, gold has been lacking some of the fundamental tailwinds that helped it rise earlier in the year. From the perspective of the technicians we follow, it remains in a no man’s land — not having broken support, but unable to break out. Tactical positions can still be held, but we are not near-term bullish.
Thanks for listening; we welcome your calls and questions.
