After a fruitful September for investors, they now need the complacency beaten out of them, say many Wall Street pros.
That painful beat down might come throughout the last three months of this year as investors notice the harsh realities of a simmering U.S. trade war with China extending deep into 2020. Some of these realities include rising prices of doing business for Corporate America (which pressures profits higher than investors presently believe) and a new wave of political trade rhetoric from the Trump administration (which injects doses of headline threat back into stocks).
Think along the lines of the December 2018 market massacre, episode two.
Diamond Hill Capital Management John McClane mentioned on Yahoo Finance’s The First Trade that they have now noticed for a while that the fourth quarter of 2019 would repeat what they saw in the fourth quarter of 2018. It’s predicated on a resolution with China, and what they see out of the U.K. They proceed to see macroeconomic data weaken throughout on the board. On a micro level, McClane see it in the companies they’re following as effectively.
Forget the vacation 2018 market massacre? Permit them to jog everyone’s memory because it was downright ugly. The S&P 500 and Dow plunged 13.9% and 11.8%, respectively, in the fourth quarter as trade war fears and concerns of further Federal Reserve price hikes walloped equities. The riskier Nasdaq Composite blew up to the tune of 17.5%; the market is the most significant three-month decline since 2008.
Facebook (F.B.) received shellacked to the tune of 18% in the quarter, while Apple (AAPL) shed an astounding 31%. Netflix (NFLX) was clobbered by 30%.