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February 16, 2018 at 09:42 AM
Volatility reared its ugly head this month, in what many still maintain is more likely a correction than signs of an impending crash. The selloff was initially sparked by investor concerns about rising interest rates and a fear that inflation may come roaring back along with higher bond yields. Even those who believe that much of the market is stable and growing get jittery when indexes make such a sudden drop. If nothing else, it was a good reminder to investors to remain wide awake and take a consultative approach to their portfolios.
When we saw the market pull back on Feb. 2 and continue for the next few days, we reminded investors that bear markets or pullbacks are also times to seek opportunity. Whether it’s to buy the dip and take on enhanced exposure to the S&P 500 using a lightly leveraged bull fund, or take an inverse view to express bearish sentiment on the index, investors have options in seemingly downward spirals.
However, there are still solid signs that U.S. companies are poised for growth. Unemployment is as low as it’s been this century, and average hourly wages appear to be rising for the first time in years. And a number of companies have announced plans to take advantage of reduced taxes by making investments in both physical and human capital, and in paying back shareholders via increased dividends.
Regarding health care, affordable access remains one of the most important issues facing Americans. CVS’ acquisition of Aetna, announced in December, certainly has the potential to be a major game changer, as does the announcement by Amazon, Berkshire Hathaway and JPMorgan of their plan to launch a private health care plan for their employees. That last announcement immediately caused an uproar in the markets, with CVS, UnitedHealth Group, Cigna, Walgreens and other major players all seeing their share prices drop overnight, but the long-term effects remain to be seen.
If the CVS/Aetna deal actually goes through, it could create a multibillion-dollar health care powerhouse combining retail location and health care services, which would certainly give dominant player UnitedHealth (UNH) a run for its money. And although CVS may be changing the game, UnitedHealth remains the industry leader. The company has been increasing revenues since 2014 by growing its menu of health insurance products as well as making significant improvements to its plans and networks.
