Markets continue to bounce near the lows for the year, as investors question the direction for asset prices into 2019. This year has been particularly painful, with dramatic swings between gains and losses led by geopolitics and the Federal Reserve’s rate hike campaign. Without a clear catalyst for a leg higher in equities after this year’s tax cuts, many are wondering if the growth trajectory of the global economy portends a recession on the horizon, particularly given the length of the current expansion and the end of easy money. 2019 looks set to mirror this year’s volatility, and investors should buckle up for another wild ride.

The two biggest macro events of the week centered on the US jobs report and Brexit, both of which added to ongoing volatility. The jobs report underwhelmed, with numbers lower than estimated, but still showing the strength of the labor market. Despite being positive, many believe this will provide additional pressure on the Fed to reevaluate their rate hike campaign. Signs of slowing growth are now showing up in both labor figures as well as other leading indicators, resulting in market expectations being dialed back on 2019 rate rises. The Fed also changed their language, indicating they would base decisions on incoming data, and pause if necessary to keep financial conditions stable. On the other side of the Atlantic, the British Prime Minister, Teresa May, took a daring move by calling for a vote of confidence in her leadership. She ultimately succeeded, retaining her position and emboldening her negotiating power in the Brexit debacle. The question now becomes, will her deal with the EU be accepted by Parliament, will a second referendum be called, or will no decision be made in time to stop a ”hard” Brexit. Until the picture is clear, we expect British and European equities to remain highly volatile.

We made some significant trades in the past week, raising cash to be prepared for additional market swings ahead. The gyrations as of late appear to be almost entirely sentiment driven given their pace and size, with no clear direction. Equities have seen dramatic moves intraday, with swings of over 2% in either direction, and reversals based off of headlines alone. This type of market warrants being nimble and ready to take action as prices accelerate higher or slide sharply to the downside. Warning signs of a slowdown are beginning to show up in data from housing, credit conditions, earnings downgrades, and GDP figures. The uncertainty out of Washington only adds to the pain, as investors conditioned for gridlock now face policy action with the potential for significant direct effects on asset prices. Until calm returns, we expect market participants to remain on edge and look for direction. For now, we believe our clients will sleep better at night knowing they’re in a position to take action if necessary without being overextended. While our conviction that the bull market is intact remains, the longer term trend may hit air pockets along the way that could present significant opportunity for tactical investors.