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At Pacific Global Investment Management Company, we are value investors. We use patience and discipline as we seek to buy high quality, well-positioned companies at attractive prices. As focused investors, we know each company in which we invest, how it operates and what makes it successful. Click to watch the PG WELCOME VIDEO.
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Investor sentiment soared in the fourth quarter with the unexpected results of the U.S. elections. Markets had not only assumed that Hillary Clinton would be the next President of the U.S. but that she might also deliver a Democratic majority in the U.S. Senate. In hindsight, Donald Trump’s election and Republican control of the Congress turned out to be the U.S. version of Brexit when voters chose a different course of action from polling projections. After the initial shock subsided, the markets reacted favorably with a strong showing in November that carried the markets through the end of the year.
Junior: What is driving the recent increase in market volatility?
Charles: Market volatility tends to increase with major headline events or when investors focus on a specific economic risk. For example, earlier in the year, concerns related to the Chinese economy, central banks’ monetary policy and falling crude oil prices caused investors to sell equities to move into cash or government bonds. Similarly, in June, Britain’s unexpected vote to leave the European Union (the so called “Brexit Vote”) triggered a sharp, but brief, market selloff. Also, quarterly earnings, where companies report results and provide commentary on their business outlooks, can unsettle the markets. Recently, the focus has returned to interest rate policies of the Federal Reserve, and those of other major central banks, as investors worry about the timing of an eventual end of the prolonged period of historically low interest rates.