Recent Posts

Inversions, Trade Wars, and Uncertainty - What's not to like?

Quarterly Comments: Third Quarter 2019

Heard on Bloomberg radio this morning – “Looking forward, people do not like what they see.” Why is that? Well, we have a host of reasons to be cautious, but here are the top few:

First on that list has to be the fact that the yield curve, the difference in rates on the 2 year Treasury note when compared to the 10 year Treasury bond has inverted. In other words, the two year rate pushed higher than the ten year rate. This “inversion” has been a reliable predictor of most of the recessions since the 1970’s. The last time the yield curve inverted was in 2007. Today, the stock market is down 800 points. Ouch!

The Federal Reserve may not be able to stem the tide of “risk off” as money moves out of equities into safe havens such as bonds, pushing the 10 year rate even lower. The so called Powell Put, the idea that the Fed will lower rates and save us, may not be as impactful or as successful in shoring up the equity markets as in the past. There seems to be a global race to a monetary bottom of lower and lower rates. If the major currencies of the world move rates down somewhat together, the impact of lower rates is diminished.

The trade and tariff war with China remains a cause of uncertainty for business and, by extension, the stock markets. Remember that a tariff is a tax paid by the end user of the item, usually the consumer (us). This uncertainty has mostly erased the expected economic growth from the tax cuts of 2017. So, we see Industrial weakness now and we are waiting to see if consumer confidence will remain at a high level through the rest of this year. While we have been given some relief from several of the consumer items due to be tariffed in September (hence the 400 point DOW gain earlier this week), the reprieve is only until December and fully half of the items on the list remain there for the September trigger date. We should expect that this trade dispute will play out over a much longer time period, even through the election in 2020.

Is there any good news? Maybe.

Trade talks with the Chinese are back on.

Our Global fund positions are more positive than they were this time last year, and, with Treasury interest rates falling, our Bond positions are well into positive territory this year. Over the past eighteen months we had been moving more allocation percentage to asset classes we believed would be less effected by negative volatility. We are likely to continue this posture and take some more of the gains we see year to date in the equity funds and reposition that money into an allocation overweight to bonds and dividend paying Value style funds and ETFs.

The probability of a recession has certainly increased recently, but that does not mean it is imminent, nor is it a certainty. It does make for a challenging investment environment, however.

To possibly gain more clarity, be sure to mark your calendars for our next quarterly economic and investment update call, Listen at Lunch, in early October. At that time we may have a better understanding of the trends and expectations for the final months of 2019.


Linda P. Erickson is a Registered Principal of Cetera Advisor Networks LLC, member FINRA/SIPC.

The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with or without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value.

Investors should carefully consider a fund’s investment objectives, risks, charges, and expenses. This and other important information is contained in the prospectus and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing.


301 N. Elm Street, Suite 301

Greensboro, NC 27401

P: 336-274-9403

F: 336-273-0217


3001 Academy Rd., Suite 110

Durham, NC 27707

P: 919-595-0619

  • LinkedIn - Grey Circle
  • Facebook - Grey Circle

Advisory services and securities offered through Cetera Advisor Networks LLC, member FINRA/SIPC,  a broker-dealer & Registered Investment Advisor.  Cetera is under separate ownership from any other named entity. 

Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.

This site is published for residents of the United States only. Registered Representatives of Cetera Advisor Networks LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Advisor Networks LLC site at