The following economic awareness entry is based on short-term events and therefore should not be taken as information towards making investment decisions, which are of a long-term nature. It is only meant to provide clarity regarding current economic events, as there is often a large degree of incorrect information dispersed through the media or other sources.
We are now two weeks into July, which means the 1st half of 2018 is behind us. As we analyze what may be ahead in the markets, we'll also strive to understand what has happened so far this year.
2nd Quarter Update: Key Details to Know
- Domestic indexes had mixed results.
At the end of the 1st quarter, the NASDAQ was up by 2.3%, while both the S&P 500 and Dow were in negative territory for the year. Fast-forward to the 2nd quarter's end, and the Dow was still down with a 1.8% loss between January and June. During the same time period, the S&P 500 gained 1.7% and the NASDAQ added 8.8%.
- Trade tension persisted.
Global trade was a major topic throughout the 2nd quarter. In April, the U.S. proposed $50 billion of tariffs on Chinese products - and China announced its own tariffs in response. The trade tension also extended to Canada, the EU, and Mexico as the U.S. added tariffs to steel and aluminum imports from these countries. While this situation attracted significant news coverage, investors were able to put much of their focus on economic details - such as corporate earnings - instead.
- Interest rates rose.
In June, the Federal Reserve increased interest rates by 0.25%, which marks the 2nd rate hike so far this year. The Fed gave an optimistic view of the economy and said that two more increases could be ahead in 2018.
- The labor market stayed strong.
In May, unemployment hit its lowest level since 2000. June's labor report showed unemployment increasing to 4% but for a positive reason: more people reentering the job market. The latest report also showed better-than-expected job growth. Wage increases missed expectations and still have room to expand more quickly. At the same time, their steady pace should help keep inflation in check and interest rate increases continue gradually.
More 2nd-quarter data is still to come. Gross Domestic Product may have increased by as much as 5% annually between April and June. That growth rate would be over twice what we experienced in the 1st quarter. We are also at the very beginning of 2nd-quarter corporate earnings season, and analysts predict earnings growth of 20%.
Moving into the 3rd quarter, trade will likely continue to be a hot topic, but it's far from being the only detail worth following. As we gain more information about what happened in the 2nd quarter, we will combine those perspectives with the performance we're experiencing now. In the meantime, if you have any questions, we're here to talk.
Monday: Retail Sales
Tuesday: Industrial Production, Housing Market Index
Wednesday: Housing Starts
Thursday: Jobless Claims
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P US Investment Grade Corporate Bond Index contains US- and foreign issued investment grade corporate bonds denominated in US dollars. The SPUSCIG launched on April 9, 2013. All information for an index prior to its launch date is back teased, based on the methodology that was in effect on the launch date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back tested returns.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
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