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Your Wealth

April 2019 Wealth Commentary

Global stock markets are doing better than the general economy, which supports the view that we will see economic activity improve in the second half of the year. Certain leading indicators have started to produce some green shoots, and commodities like steel and oil have held support levels.

Under this scenario we should see equity markets primarily driven by multiple expansion until the economy and earnings catch up, which can be a risky proposition if markets get too far ahead of themselves. International developed and emerging market PE’s are both below historic averages, so there is room to move higher, and the U.S. is selling just slightly above historic PE’s in the 17X range, somewhat mitigating valuation risk. Europe and Japan are still weak, but they can piggyback on US and Chinese economic growth, which should accelerate concurrent with a trade deal and Chinese fiscal stimulus.

Overall the market has priced in many of these expectations, and going forward we need certain events to occur in order to ensure a global soft landing: the U.S./Mexico border must remain open, no new EU tariffs, a soft and orderly Brexit, Japanese fiscal stimulus ahead of the new VAT tax, continued China fiscal stimulus, an accommodative Fed, a debt ceiling resolution and tempered aggression from the House regarding impeachment.

Volatility has disappeared again, which we know can last for protracted periods of time but also sets us up for negative surprises. Given that most global equity markets are up 15% or more year-to-date, it’s hard to make the case for significant additional upside until the economy and earnings catch up. Please call or email me with any questions.

Past performance quoted is past performance and is not a guarantee of future results. Portfolio diversification does not guarantee investment returns and does not eliminate the risk of loss. The opinions and estimates put forth constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.


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