Navigating Market Turbulence: Staying Grounded in a Shifting Landscape

Dear Clients,

Financial markets have certainly been generating a lot of noise lately. We have witnessed some unusual movements that warrant a closer look on a very regular basis.. At Just Service Global (JSG), we understand that these fluctuations can be concerning, and we want to provide you with a clear perspective and, more importantly, reasons to remain calm and connected to your financial adviser within the JSG Global Network.

Decoding the Recent Market Activity

Dominion Fund Management recently highlighted three key interconnected issues that have contributed to the recent market jitters:

1. Rising US Government Bond Yields: We've seen a notable drop in US government bond prices, particularly for longer-term bonds. This inverse relationship means that interest rates, or yields, have been pushed higher.

2. Weakening US Dollar: The US dollar has experienced a decline in value compared to other global currencies.

3. Surging Stock Market Volatility: The stock market has seen a significant increase in volatility, reaching its highest level in the past five years.

   
   

Interestingly, this combination of events is somewhat counterintuitive. Typically, when stock markets become turbulent and fear rises (as indicated by the VIX "fear index"), investors tend to flock to the safety of US government bonds, driving their prices up and yields down. However, we've observed the opposite: rising fear accompanied by investors selling Treasuries, pushing yields higher. Simultaneously, the weakening dollar defies the usual expectation that higher US interest rates would attract international capital and boost its value.

The Underlying Cause: Uncertainty in US Economic Policy

A significant factor contributing to this unusual market behavior is the perceived unpredictability in US economic policy. Recent pronouncements and subsequent adjustments regarding tariff plans have created a sense of confusion and instability among investors. This kind of inconsistency can make investors nervous, as it becomes difficult to anticipate future policy directions.

When the direction of economic leadership appears uncertain, especially against a backdrop of high government debt and lingering inflation concerns, global investors may start to question the traditional safe-haven status of US assets like bonds and the dollar. This can lead to a demand for higher returns (higher yields) to compensate for the perceived increased risk of holding US Treasuries.

The Strain on Global Financial Pillars

The fact that both the US dollar and Treasuries – historically considered the cornerstones of global finance – are experiencing strain is a serious signal. A decline in trust in these assets could indeed create broader instability within the global financial system.

Reasons to Stay Calm and Focused

While these developments are noteworthy, it's crucial to avoid overreacting. Markets often experience periods of adjustment and volatility, particularly at potential turning points. The rapid shifts we've seen may represent investors repositioning their portfolios, a process that can lead to temporary confusion before settling down.

It's also important to consider the broader context. As Dominion Fund Management points out, while the speed of recent changes has been unsettling, the US dollar's value has only returned to levels seen before the last presidential election, and bond yields are back to where they were earlier this year.

Furthermore, there are underlying strengths in the US economy. Recent data showed a healthy increase in job creation, inflation appears to be cooling, and company earnings remain robust. While economic clouds may be on the horizon, the fundamental economic engine is, for now, still showing resilience.

Your JSG Adviser: Your Guide Through Market Uncertainty

In times like these, having a trusted financial adviser is more important than ever. Your adviser within the Just Service Network can provide invaluable support by:

• Offering a rational and informed perspective on market events, filtering out emotional responses.

• Analyzing how these global dynamics might specifically impact your portfolio.

• Reiterating the importance of diversification and your long-term financial plan.

• Helping you avoid impulsive decisions that could be detrimental to your financial health.

• Providing tailored guidance based on your individual circumstances, goals, risk appetite and timeframes.

The current market turbulence, influenced by global economic concerns and policy uncertainty, underscores the need for a well-diversified and strategically managed portfolio. If you are not in current contact with your adviser within the Just Service Network, we strongly urge you to do so.

Regards

The Just Service Client Service Team