Te Weight of the Evidence
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Keep the Big Picture in Perspective

Obsess over any one indicator and you could miss the broader implications

There's no shortage of catalysts moving the markets in one direction or another this year.

Sabre-rattling in the Middle East. A trade war waged on multiple fronts. Presidential primary jockeying. When Fed Chair Jay Powell in June implied a rate cut was coming in July – only a year after having raised rates four times – he also cautioned against reading too much into their infamous "dot plot" indicators, saying that paying too much attention to any one dot could cause one to lose track of the larger picture.

That's good advice for all investors. Like individual brushstrokes in an impressionist painting, each new tweet about trade policy or interpretation of Fed commentary is just one of many things that inform our appreciation of the big picture. And the picture we see forming is one of cautious optimism.

WHILE THE ECONOMY STILL CHUGS ALONG… While the current U.S. economic expansion is the longest on record, it is also the weakest in terms of average growth. This may mean room for continued and even more robust growth. Just remember that macro risks – particularly related to global trade – have been on the rise, curbing economic expectations.

…THE MARKET SHOWS SIGNS OF TIRING Stock performance hasn't seen as steady an upward climb as economic growth over the last ten years, and investors with the stomach for some risk and uncertainty have been rewarded. But no bull market lasts forever, not while global markets are already feeling the sting of trade disputes and earnings estimates are coming down.

THE FED CHANGES ITS TUNE While the Fed has spent much of 2019 trying to pivot away from its 2018 rate increases, more than half of all global central banks are now easing monetary policy. This could have significant implications for stocks, as all of the net gains in global equities over the past 30 years have come when a majority of central banks have been lowering interest rates.

THE BOTTOM LINE Against the backdrop of friendlier central bank policy, we'll be looking for continued resiliency from the U.S. economy, as well as signs of stock market strength that run deeper than headlines about S&P returns. Your Baird Financial Advisor can help you make sense of the landscape and what it could mean for your financial plans.

The Weight of the Evidence

Outlook Neutral Amid Uncertainties

Plus sign

FED Policy

The Fed has joined the majority of other global central banks in cutting interest rates.

Neutral or equal sign

Economic Fundamentals

Heightened trade tensions could weigh on investor confidence and add to existing economic uncertainty.

minus sign


Stretched equity valuations suggest an increased risk of future underperformance.

neutral or equal sign


Investor sentiment, which had tilted toward optimism when stocks reached new highs, has started to turn pessimistic.

Neutral or equal sign

Seasonal Patterns and Trends

Already lacking significant momentum, stocks have entered a season of historical (and well-publicized) weakness.

Neutral or equal sign


Recent improvements to broad market participation could be tested as volatility picks up.

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