2019 started out much as 2018 ended, with a slew of data adding to an already shaky bull market. Despite some initial positive news on the trade front with China, data provided later in the week showed a deterioration in Chinese growth figures, adding to global concern of an increasingly likely slowdown. Adding fuel to the fire, Apple provided guidance that their fourth quarter sales figures would be much weaker than expected, citing a weakened Chinese consumer, likely from the trade war fallout. As one of the largest US companies and a bellwether for US stock markets, many are seeing Apple’s guidance as just the first of many downward revisions in expectations from corporate America. With growth fears already simmering for global investors, markets took the bad news poorly and sold off in response. In addition to reports of slowing global growth, the US government remains in a shutdown, piling on uncertainty and detracting from growth this year. The lack of paychecks and spending the government provides on a weekly basis to the economy is significant, and keeping employees out of work will detract from figures for the year.

Despite all the doom and gloom, there remains many bright spots in the global economy that don’t seem to receive quite as much press. To begin with, this holiday shopping season is looking to be the most robust since the mid-2000s, as consumer’s wallets felt full this year from wage gains, low unemployment, and tax cuts. Comprising roughly 70% of GDP in the US, consumer spending appears to remain firmly in place from the strong employment picture and wealth effects from a stock market, that despite seeing recent struggles, has realized steady gains for most of the past decade.

Regarding the struggles in China, the growth scare that is manifesting there is very reminiscent of 2015, when similar fears led to a brief market meltdown that prompted government support and intervention to stop the bleeding. We believe this time around will be no different, with Beijing likely supporting the economy through a series of fiscal stimulus measures, coupled with potential rate cuts or monetary easing. With the need to save face in the ongoing trade war, the Chinese will likely be forced to take steps to prop up their economy through whatever steps necessary.

Despite the seemingly insurmountable wall of worry dominating the headlines, we have marginally deployed some the cash raised in portfolios over the last several weeks. During the market meltdown we were able to curb some of the losses on the way down and find better opportunities near the recent bottom, where prices seemed very reasonable. We must remember that slower growth does not imply an outright contraction, and the US remains poised to continue growing above trend for at least the next year, supported by tax cuts, a still loose-monetary policy environment, and robust consumer demand. For now, we still have sizeable cash positions in portfolios, ready to be used when conditions stabilize further.