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“Is December’s Market Dip Too Risky to Ignore?

As the holiday season draws closer, markets are starting to become more uncertain, largely due to the high risk of market downside. Political tensions, rising interest rates, and the uncertain global economic outlook have all created a risky environment that could put markets in the red come December. The main risk factor is higher interest rates, which are occurring as the United States Federal Reserve begins to adjust its interest rate policies. The Federal Reserve is taking a more hawkish stance on interest rates and is expected to raise the federal funds rate three times in 2019. This means that those who borrow money are going to have to pay more for loans, which could take some of the wind out of the sails of the broader economy. The ongoing international trade war between the United States and China also continues to cast a shadow over markets. Although there has been recent progress in negotiations, there is still a lack of clarity about how negotiations will unfold going forward. If the economic disagreements between the two countries worsen, it could have a cascading affect on the global economy, creating turbulence in the markets. Finally, the uncertain global economic outlook is creating an atmosphere of caution. China’s economy has slowed significantly in recent months due to the trade tensions, and other emerging markets are feeling the strain as well. This could lead to market volatility as investors try to navigate the uncertainty and guess how these issues will affect their investments. All in all, the combination of higher interest rates, the trade war, and the uncertain global economic outlook could easily cause markets to dip in December. With that in mind, it is best for investors to be prudent and plan accordingly as this potentially volatile period emerges. Taking a long-term approach to investing and focusing on diversification and risk management will likely serve investors much better in the long run.