Stay Defensive on Asset Valuations Due to Uncertainty

October 17, 2016

Stay Defensive on Asset Valuations Due to Uncertainty Photo

Both stocks and bonds lost ground last week as significant uncertainty remains ever present in market dialog. The week ahead holds more potentially negative headlines for asset prices. A few of the uncertainties that have the potential to put pressure on the markets in the week ahead are:

  • Concern has been quietly growing again about the strength of the Chinese economy. This week we will receive the release of third quarter gross domestic product (GDP).
  • In Europe, Brexit concerns have risen in recent weeks as the process and implications of Britain’s exit gain more dialog.
  • The European Central Bank (ECB) meets this week, and I expect to hear more commentary on European monetary policy and the future of quantitative monetary policies.
  • In the U.S., we have the last Presidential debate, which will surely steal the headlines with less than a month before the elections.

U.S. company third quarter earnings continue to disappoint as the low economic growth environment combined with high valuations makes further equity gains in the U.S. difficult. Markets don't like uncertainty, and we currently have an environment with many potential headline-making issues that will keep investors cautious.

Tags: Monday Morning O'Malley | European Central Bank | Elections | Valuation | China | Defensive position | Brexit | Market uncertainty

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