October 10, 2018
BNY Mellon’s Lockwood issues Investment Insights for the fourth quarter, expects periods of intermittent volatility
KING OF PRUSSIA, Pa. — The Federal Reserve (Fed) could soon reach a policy rate that meets or exceeds the neutral rate of interest, leading to increased uncertainty around future Fed moves and potentially to unexpected jolts in the market, according to the recent Investment Insights issued by BNY Mellon’s Lockwood Advisors, Inc. (Lockwood).
The report indicates that the Fed is likely to reach the neutral rate—the long-term interest rate that causes neither overheating (boom) nor lack of demand (recession)—sometime in 2019.
Further, a well-entrenched labor market recovery and a rapidly tightening job market may eventually lead to faster wage gains, reinforcing the Fed’s tightening policy, says the report.
“For U.S. markets, 2019 will likely focus on Fed-watching,” said Matthew Forester, chief investment officer at BNY Mellon’s Lockwood Advisors. “Once the Fed reaches its neutral rate, monetary policy will have a greater impact on the direction of the economy and markets.
“Looking ahead into 2019, we will likely need to adjust to a more normalized rate of corporate earnings growth, as the benefits of the corporate tax cuts are now fully baked into balance sheets. Combined with the implications of monetary policy for the economy, 2019 is likely to be a year where investors will be on high alert on a growing list of factors.”
Highlights from the report include:
“U.S. equity markets continued to be the star in the third quarter, showing a remarkable resiliency in shrugging off risk,” said Forester. “The markets have weathered higher input costs and tightening monetary policy, thorny trade issues and geopolitical risk—as the underlying economic fundamentals have remained strong. Looking into the fourth quarter, the outcomes of the mid-term elections and any unexpected developments in the Russian interference investigation are two issues that could turn the tide and lead to increased uncertainty in markets.”
For more information on these trends, please visit www.lockwoodadvisors.com to view the full report and relevant disclosures.
This material is intended for informational purposes only and does not constitute investment advice or an offer or solicitation to purchase, hold or sell any securities. The opinions expressed by Lockwood are as of October 2018, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Lockwood to be reliable, but are not necessarily all inclusive. This material may contain forward-looking information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.
About BNY Mellon’s Lockwood Advisors, Inc.
Lockwood Advisors, Inc. is a leading provider of managed account solutions. As a program sponsor, Lockwood offers access to some of the industry’s leading investment managers, provides independent research on separate account managers, and develops advisory solutions to help investment professionals meet the diverse needs of their clients.
Lockwood also offers discretionary portfolio management solutions through financial institutions and independent registered investment advisers. Lockwood Advisors, Inc. is an investment adviser registered in the United States under the Investment Advisers Act of 1940, an affiliate of Pershing LLC and a wholly owned subsidiary of The Bank of New York Mellon Corporation (BNY Mellon).
About BNY Mellon's Pershing
BNY Mellon’s Pershing and its affiliates provide advisors, broker-dealers, family offices, hedge fund and ’40 Act fund managers, registered investment advisor firms and wealth managers with a broad suite of global financial business solutions. Many of the world’s most sophisticated and successful financial services firms rely on Pershing for clearing and custody, investment and retirement solutions, technology, enterprise data management, trading services, prime brokerage and business consulting.
Pershing helps clients improve profitability and drive growth, create capacity and efficiency, attract and retain talent, and manage risk and regulation. With a network of offices worldwide, Pershing provides business-to-business solutions to clients representing approximately 7 million investor accounts globally. Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. Additional information is available on pershing.com, or follow us on Twitter @Pershing.
About BNY Mellon
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of December 31, 2018, BNY Mellon had $33.1 trillion in assets under custody and/or administration, and $1.7 trillion in assets under management.
BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.