Third Quarter 2018 Commentary After a rocky start to the year, economic growth stayed above trend, mostly fueled by tax cuts and consumer spending. Some investors were drawn toward riskier assets after several strong earnings seasons while others worry about how trade tensions and the upcoming mid-term elections will drive political risk and impact the markets. As we ride out this late part of the business cycle, there is also an underlying sense of fear of the next economic downturn, especially as the momentum from global growth has slowed down.Looming trade wars, particularly between the U.S. and China, have certainly impacted the global market outlook. Many hope the trade confrontation will diminish after mid-term elections, but the polls show that respondents, across all political groups, feel trade relations between China and the U.S. are unfair. Politicians are likely to continue to put pressure on China past the elections, whether the Democrats take over majority of the House of Representatives or not, which may cause more political noise.On the other hand, the Federal Reserve is doing everything they can to keep the U.S. economy from overheating and inflation from exceeding their 2% target. At their last meeting, they decided to raise the Federal Funds Rate again by 0.25%. In addition, they removed the word “accommodative” from their current policy stance signaling a steady path toward three or four more rate hikes into 2019. The hope is for gradual and careful Fed action to avoid jolting the economy into an unwarranted recession. However, if the government begins to tighten fiscal policy next year, while the Federal Reserve stays actively on course, indicators point to a possible recession within the next 2 years. Although we don’t know exactly when the next recession will hit, we do know the best way to stay in the game is to be prepared for any period of weakness. We are able to use diversification and take a defensive stance to mitigate risk. While the U.S. continues to outperform the global economy, our preference is to overweight our equity allocation to U.S. stocks. Fixed income can be challenging to navigate in this environment. That’s why it’s important to upgrade credit quality for protection against a market downturn and keep floating rate bonds with limited duration to hedge against interest rate movements. While we have strategies in place, we are more effective with aligning your current asset allocation with your risk tolerance and financial needs when we work together. Please let us know if there have been any changes to your financial circumstances, goals, and/or objectives. We are here to help. We greatly appreciate our partnership with you and we send warm wishes your way for the upcoming Holiday season!