We touched on the economic aspect. Despite the renewed enthusiasm among traders, economists still anticipate a recessionary period to start by 2020. The prospect of a recession is also the main cause of anxiety among CEOs, which will certainly play into their forward year spending plans. Even the hawks leading the Fed have become more dovish in tone at the possibility of a slowdown hitting the economy before the year is out.
As for political troubles, the longest government shutdown is nearing a full month and shows no signs of ending as of this writing. Adding to the already bleak image the shutdown paints of those at the levers of power in the U.S., the White House recently released a heightened figure estimating the negative impact the shutdown could have national productivity, about -0.13 percent a week, nearly double their original estimate.
Add to that a still growing funding deficit — exacerbated by 2017’s tax cuts — an ongoing investigation into connections between Russian interests and President Donald Trump’s 2016 election campaign and a newly Democratic House of Representatives with the power to subpoena the President’s tax returns and relevant financial records. It doesn’t take a vivid imagination to picture things becoming much more chaotic in Washington over the course of the year.
Finally, there’s simply the fact that, while the U.S. exhibited impressive economic growth over 2018, much of the other world economies were already feeling the effects of a tightening economic environment. India began the year with strong GDP figures, but uneven productivity and currency problems held it back in the following quarter, which only grew about 1.6 percent last year, in the global rankings. Germany posted its lowest growth in five years while China had its worst growth year in nearly 30.
This ultimately brings us to the ongoing trade war between the U.S. and China, which also has no end in sight. Adding salt to the trade wounds are other continued disputes between the U.S. and several of its other trading partners. This includes Canada and Mexico, which still have tariffs on several of their main exports, as well as Britain and the EU.
The point is, the market isn’t out of the woods yet. Lagging signals like economic data and corporate data might not be showing the effects of all of these events, but it’s hard to believe the bill won’t come soon.
If you’re a tactical manager anticipating a broad market pullback, or running a long/short or sector rotation strategy, SPDN: Direxion Daily S&P 500® Bear 1x Shares may help you seek a more cost effective way to hedge and make changes to asset allocations in your portfolio.
* The Net Expense Ratio includes management fees, other operating expenses and Acquired Fund Fees and Expenses. If Acquired Fund Fees and Expenses were excluded, the Net Expense Ratio would be 0.45%. The Fund’s adviser, Rafferty Asset Management, LLC (“Rafferty”) has entered into an Operating Expense Limitation Agreement with the Fund. Under the Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2019, to the extent that the Fund’s Total Annual Fund Operating Expenses exceed 0.45% of the Fund’s average daily net assets (excluding, as applicable, among other expenses, taxes, swap nancing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses). If these expenses were included, the expense ratio would be higher.
