Current State of the US Economy

Despite the increase in volatility that occurred at the beginning of this year, there is the possibility of soon seeing all-time highs in the market.

We consider the correction that happened at the beginning of the year as healthy, at the end of a major business cycle. The cycle was mainly driven by the policies of the Trump Administration, which took almost one year in which to be factored. The biggest policy to have an impact was the decreased corporate taxes that freed up more money for companies to reinvest in their operations and to grow.

Fundamentally speaking, companies appear strong, and the economy looks very robust. In the last quarter’s results, companies have bested by far the analysts’ expectations.

The main risks we see coming in 2019 are the increase in interest rates. Given the good state of the economy, this increase could hurt countries with high levels of debt. Countries in Southern Europe and China are the biggest concerns. We see some possibility of having an inverted yield curve by the beginning of 2020.

We don’t see the trade wars as a driver for a possible recession. If, for example, there’s an increase in US tariffs and if other countries retaliate in the same proportion, then there may be a decrease of 0.5% in the global growth until 2020. In our view, this would not be representative.

At this stage, we think buying hedges such as put options or structured notes with capital protection might be appropriate. Consideration might also be given to buying some uncorrelated assets to diversify, such as hedge funds.

So, we stay bullish on the American small caps, tech companies, financials and consumer companies.

Written by Vasco Moura
Vasco Moura, Manager & Market Analyst at TeleTrade Portugal, has more than six years in the finance industry. His prior experience is related to the credit industry, where he worked for one Hedge Fund in London, and for the non-performing loan industry as well. After completing his Bachelors, he worked in Lisbon for one of the biggest asset management companies. He holds an MSc in Financial Markets and Investments.

Disclaimer: Materials, analysis, and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. The author’s opinion does not represent and should not be construed as a statement or investment advice made by TeleTrade. All Indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Before trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

TeleTrade Review