A Wild Week on Wall Street: What’s Next? > 재테크 부자기술

After a volatile week that saw major indexes edging closer to a bear market, U.S. stocks extended losses on Friday amid concerns about rising interest rates, slowing global economic growth, a looming partial federal government shutdown and the resignation of Defense Secretary James Mattis.

Markets have become increasingly volatile due to concerns about trade tensions between the United States and China, tightening financial conditions, a worsening outlook for corporate earnings growth in 2019 and the possibility the yield curve could soon invert—which is widely seen as a potential harbinger of recession.

As of Friday’s market close, the Dow Jones Industrial Average was down 16.3% from its peak in October, while the broader S&P 500® Index was down 17.5% from its September high. Both the tech-heavy NASDAQ Composite, down 21.9% from its August peak, and the Russell 2000® Index of small-cap stocks, down 25.8% from its August peak, were in bear market territory.

A bear market is typically considered to have begun when a major index falls by more than 20% from its recent peak, while a market correction is typically considered to have occurred when an index declines by more than 10% and less than 20%.

For investors with short-term horizons, a natural question is whether stocks, in general, are at a bottom. It’s impossible to answer that question definitively, as predicting short-term market movements is notoriously difficult, if not impossible.

However, “financial conditions have tightened meaningfully this year, which tends to put downward pressure on stocks and earnings multiples,” says Schwab Chief Investment Strategist Liz Ann Sonders. “Our cautious outlook persists, as we see increasing risk of a recession heading into 2019 and continued spikes in volatility and fierce pullbacks/corrections.”

Is it 2008 all over again?

“That’s unlikely,” says Mark Riepe, head of the Schwab Center for Financial Research, “We are concerned about slowing economies in both the U.S. and the rest of the world, but we don’t see this turning into a 2008-type scenario. The distinguishing feature of that time period was financial system instability and insolvencies stemming from, among other things, high use of leverage. We believe the many steps taken in the intervening 10 years have strengthened the financial system and thus substantially reduced the risk of that scenario playing out today.”

“Banks are less vulnerable today than they were ahead of the 2008-09 financial crisis and the 2012 European debt crisis,” says Jeffrey Kleintop, Schwab’s chief global investment strategist. “Most importantly, there has been a reduction in risky activities, including sub-prime mortgage lending. There have also been substantial regulatory and institutional changes which aim to address some of the systemic weaknesses that contributed to the global financial crisis.”

A volatile week

Stocks dropped on four of five days last week. The concerns were driven by:

• The economy. U.S. economic data suggested a weakening outlook for the housing¹ and manufacturing² areas, and China reported weaker-than-expected industrial output and retail sales data.
• Federal Reserve policy. The Fed raised the federal funds target rate by a quarter percentage point on Thursday—the fourth time it has raised rates this year. The central bank pared back its projections for interest rate increases in 2019, to two hikes from three, while signaling it could pause its tightening campaign if future economic data warrants it.
• Washington. Congress and the White House failed to reach an agreement to prevent a partial federal government shutdown from beginning on Saturday. A decision by President Donald Trump to withdraw U.S. troops from Syria led to the equally abrupt resignation of Defense Secretary Mattis. Meanwhile, trade tension between the U.S. and China continued to simmer, although a 90-day “tariff truce” has pushed the deadline for talks to March 1.

What’s next?

Heading into next week, investors will be keeping an eye on several issues, Schwab experts said. These include:

Government funding: As of Friday afternoon, a partial government shutdown was expected to begin at midnight Friday, but its potential impact on the stock market was unclear.

“A shutdown would only affect about 25% of federal spending,” says Michael Townsend, Schwab’s vice president of legislative and regulatory affairs. “Congress approved funding for the bulk of government operations, including the Departments of Defense, Education, Labor and Health and Human Services, earlier this fall.”

Previous government shutdowns have not typically resulted in a negative market reaction, particularly in recent years. “Markets have remained flat or increased slightly in each of the last seven government shutdowns,” he says.

Previous government shutdowns have had a mixed impact on U.S. stocks

Source: Schwab Center for Financial Research with data provided by Standard and Poor’s, whitehouse.gov, senate.gov, house.gov, and the Congressional Research Service. Market returns are represented by the S&P 500 Index, which represents an index of widely traded stocks. Returns do not assume reinvestment of dividends. Indexes are unmanaged, do not incur fees or expenses, and cannot be invested in directly. Returns are calculated using the percentage change between the closing price the day before the start date and the closing price the day before the end date. The start date represents the first day in which there was a funding gap, and the end date represents the first day that funding was available. The parties shown under the Senate and House columns represent the majority parties for the time period. Past performance is no indication of future results.

However, Mike says, this shutdown would occur along with other Washington developments, including the Mattis resignation, the impending shift to Democratic party control of the House of Representatives in January and a looming debt ceiling battle in 2019, that raise questions about the two parties’ ability to work together in the months ahead. He says he expects that uncertainty to continue to contribute to market volatility.

Interest rates and the yield curve: Treasury yields edged lower this week as the Fed’s projections in December pointed to a slower pace of hikes going forward, compared with projections from the September meeting. Meanwhile, the yield curve—as reflected in the difference in yield between the three-month Treasury bill and the 10-year Treasury bond—has flattened. Another interest rate hike or two could cause short-term rates to rise higher than long-term rates, a situation known as an “inverted” yield curve.

“Most recessions in modern history have been preceded by an inverted yield curve, but the lag times have been long and highly variable—anywhere from a few months to more than two years,” says Collin Martin, fixed income strategist for the Schwab Center for Financial Research.

U.S.-China trade and Brexit: Ongoing trade friction between the U.S. and China likely will continue to be a cause of investor concern, although a 90-day tariff truce has pushed the deadline on talks to March 1. Meanwhile, a parliamentary vote on the UK’s Brexit plan has been postponed to January.

Considerations for long-term investors

Downturns are always unnerving, but there are steps you can take to help buffer the effect of market volatility on your portfolio. Remember that our investing principles don’t change just because the market is down, and yours shouldn’t either.

Also, it’s nearly impossible to time the market, and it’s generally healthier for your portfolio if you resist the urge to sell based solely on recent market movements. For example, since 1974 there have been 10 times when the S&P 500 dropped at least 16% from its peak. In six of those 10 times, a bear market didn’t result.

You can’t control what the market does, but there are things that you can control. Here are some things you might consider doing now:

• Get a financial plan. Having a financial plan based on your goals can help you craft an appropriately diversified portfolio and weather bouts of market volatility. If you need help, Schwab is here: Call us at 800-355-2162, visit a branch or find a consultant.
• If you already have a plan, revisit it and make sure it still matches your investment goals and objectives. (e.g., you shouldn’t focus only on investments like stocks which designed to do well over the long-term if you have shorter-term needs).
• Revisit your risk tolerance. Volatility is often a wake-up call for investors who haven’t been engaged in their portfolios. If you’re not comfortable with your risk level, it may be prudent to dial back the overall risk in your portfolio, while taking into account both short- and long-term goals.
• Consider your investing life stage: If you’re near or already in retirement, you may want to review your portfolio and income requirements. If necessary, you may want to adjust your portfolio to help buffer the effects of a market downturn on a portfolio from which you’re taking withdrawals for income (or expect to start taking withdrawals soon).
• Don’t panic. When markets are volatile, it may feel like a safe idea to sell securities and retreat to cash. However, when markets start to rebound, they often do so quite quickly, and missing those key days can have a big impact on performance. It’s generally better to make portfolio changes based on your long-term objectives, not in reaction to recent market movements.

¹ The National Association of Homebuilders/Wells Fargo Housing Index in December 2018 reflected a decline in homebuilder sentiment to 56—down from 60 in November 2018 and well below the 74 reading in December 2017.

² The New York Federal Reserve Bank’s Empire State Manufacturing Survey’s general business conditions index fell to 10.9 in December 2018 from 23.3 in November 2018.