2019: How to Navigate an Unsettled Stock Market
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York.
How are 2019 market conditions described and why should investors care about volatility?
The roller coaster stock market is choppy enough to keep many investors up at night. We've got an expert with an eye on Wall Street in 2019 with tips to help protect your portfolio from market volatility. that is unlikely to go away in the new year. First, these money and market stories you should know.
How is the 2019 government shutdown affecting IPOs and regulatory timing?
The start of 2019 marks the second week of the partial government shutdown, and one casualty appears to be the 2019 initial public offering market. The shutdown is adding regulatory uncertainty to existing market volatility that's causing delays that are disrupting the delicate timing of some IPOs. The SEC says it is dealing with bare-bones staff right now and will stop declaring effective registration statements. That's essentially a prerequisite for companies hoping to sell their stock to the public. And as tensions are flaring between Congress and the White House, it's unclear when that staffing might come back. Companies that intended to go public in early 2019 now face a shrinking window before investors demand updated financial figures.
They're also contending with market swings that could trip up the scheduling of a successful IPO. and programs designed to help displaced or outsourced workers find retraining has fallen short for some workers. The Wall Street Journal's Eric Morath writes the retraining problem is a key component of U.S. frustrations with global trade. Policymakers and economists knew that some workers would be dislocated by imports from other countries when the U.S.
Why did retraining programs for displaced workers fall short and how does that relate to market frustrations?
pursued expanded trade with Mexico, China, and others in the 1990s. But retraining didn't deliver as planned. Workers didn't move to where new jobs developed, or they fell behind while they were in school, or simply found the mountain of developing new skills in middle age too tall to climb. Now, the Trump administration is looking into ways to help workers, but experts say the retraining problem is hard to fix. See the full story at WSJ.com or the WSJ app.
What should individual investors change about their mindset heading into a volatile 2019?
If the fourth quarter of 2018 is any indication, 2019 is likely to be a year of volatility from the stock market to economic indicators. But how should the average investor prepare for the new year? Todd Jablonski is chief investment officer at Principal Global Investors, and he's on the line with us via Skype. So, Todd, this has been quite a tumultuous year. The markets were clicking on all cylinders for the first three quarters of 2018, and that's been really a rocky road at best for the rest of the year.
I think what we're seeing is quite clearly a case of a deteriorating risk return opportunity in the markets for investors. Quite frankly, 2017, even though it had produced spectacular sharp ratios for investors, really did them no favors in terms of setting expectations.
How can investors use fixed income and alternatives to insulate portfolios from volatility?
You know, it's our belief that, in fact, the high return, low volatility paradigm that's existed in the markets since the global financial crisis is really set to turn as we head into 2019.
In your notes for 2019, you say investors should adjust their mindset and adjust their portfolio. What do you mean by adjust their mindset?
I'm commenting on what I think is some of the biases that investors bring to the marketplace today, specifically they're suffering from recency bias. The high return, a low volatility paradigm that's existed again since the global financial crisis means that investors now have expectations that are misaligned with late cycle realities. What you've seen in the majority of the up in risk asset classes, equities, credit going out into emerging markets has been rewarded since the financial crisis. What we see a turning, in fact, is that investors need to realize that we're back to a more normal level of volatility. I think they're underappreciating what that means in terms of ups and downs and price movements of the things they own in their portfolios.
So let's talk about the fixed income side of someone's portfolio. With several interest rate increases likely in 2019, we also have trade issues on the table, unsettling markets.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:09
2
How are 2019 market conditions described and why should investors care about volatility?
0:09–0:24
3
How is the 2019 government shutdown affecting IPOs and regulatory timing?
0:24–1:34
4
Why did retraining programs for displaced workers fall short and how does that relate to market frustrations?
1:34–2:09
5
What should individual investors change about their mindset heading into a volatile 2019?
2:09–2:57
6
How can investors use fixed income and alternatives to insulate portfolios from volatility?
2:57–4:16
7
When does active management make sense and what horizon should investors look for in managers?
4:16–7:21
Speakers
2 identifiedMore from WSJ Your Money Briefing
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