The Macro View by Lionomics, May 2019

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Introducing The Macro View

We strive to make it easy for you to stay informed on the markets and the economy, and our new Lionomics report – The Macro View – will do just that! We work with Wilshire, one of the nation’s largest investment research consultants, to bring you investment advice and market insights. Each quarter, we’ll summarize Wilshire’s current viewpoint on the asset classes that may make up the core components of your investment portfolio, along with their views on the macro economic landscape, in The Macro View.

US stock market rebounds in Q1

In the first quarter of 2019, the US stock market took the advice of Taylor Swift and shook off the lows of December 2018. Not only did the US stock market recover from a volatile fourth quarter, it reached new highs in Q1 2019! This rebound continued through April and even into May, with a large number of Q1 earnings reports coming out much stronger than expected.*

While the initial recovery may have been driven by attractive valuations, the global central banks also helped to support stock market growth. The Federal Reserve, for example, has kept interest rates steady over the past several months within the US, more recently noting a decline in inflation. This decision has both helped boost stock markets and increase investor confidence.

Consequently, there’s been a decline in global government bond yields in Q1of 2019. Remember, interest rates and bonds have an inverse relationship — as one increases the other often decreases. Bonds were pricing in much slower growth and inflation in the first quarter, as equities were pricing in optimistic growth — talk about mixed signals!

Asset class perspectives

Wilshire has over 40 years of experience and advises on more than $1 trillion in assets. Below we’ve summarized their Q1 2019 viewpoint on the core components of your investment portfolio.

Fixed income

Given that both US stocks and bonds exhibit relatively high valuations, we believe it’s important to maintain a balanced portfolio given heightened volatility and global economic uncertainty.

Global ex-US vs. US equities

Although there’s been a decline in economic momentum abroad when compared to the US, foreign equities may still be an attractive investment option. Since the US dollar is significantly more expensive than the currencies of other countries, larger exposure to foreign assets may be an ideal investment option. This is why it’s important to remember the importance of having an allocation to both US and International equities as a means of diversification.

Emerging markets vs. developed equities

We believe that currencies and equities have largely priced in existing geopolitical risks, and that stimulus from China is likely to spur an improvement in the growth picture assuming trade negotiations progress as expected. However, given current valuations that are less attractive when compared to those in other regions, Wilshire has a more moderate view on emerging markets, meaning they have lower expectations for growth. Emerging markets will continue to play an important role from a diversification perspective in 2019.

Investor sentiment

How are investors feeling? Despite the significant recovery in global risk assets, the impact of heightened geopolitical risks, political dysfunction in the US, and slowing global economic growth, have continued to negatively impact investor sentiment. Investors often feel uneasy during times of political unrest. You can see in the chart below, Consumer Confidence (blue line) and CEO Confidence (orange line) in the US have fallen from very high levels, and we see a similar trend in the European Commission Economic Sentiment Indicator (green line).

The key takeaway here is that the specific numbers matter less – what’s important is that these three key measures of economic sentiment are all down over the course of the last year,

Lower U.S. Consumer & CEO Confidence, & European Sentiment

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It’s a marathon — not a sprint

For MoneyLion members, investing is about the long haul. Although it’s important to stay up to date on market and economic news, it’s also vital that you don’t get too caught up on the day-to-day headlines. Remember, benefiting from investments typically requires time and patience — so stick with it! We’re here to help you along the way by providing you with access to investment tools to help you reach your long-term financial goals.

* As reported by Nasdaq

Investment advisory services provided by ML Wealth, LLC. Investment Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Investment Account, see Investment Account FAQs and FORM ADV. Broker-Dealer may charge a $0.25 withdrawal fee, among other fees. MoneyLion membership required. View full terms and conditions here.

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