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.
A Look Back: Last Week's Tariffs and Mixed Housing Data
For months, fears of a global trade war have dominated headlines. Last week, China and the U.S. launched new tariffs on each other's products, but the latest round of this trade skirmish had an interesting effect. Rather than feeling concerned, both analysts and investors interpreted the tariffs to be lower than what they expected. As concerns about the global trade war calmed, both the S&P 500 and Dow reached new record highs.
In addition, we received some important economic information last week, including key updates on the housing industry. While the economy and markets are performing well, recent data indicates that the housing market isn't keeping up. The data revealed:
- The Housing Market Index remained at the same relatively low point it reached in August.
- Housing starts jumped, but new building permits declined.
- Existing home sales were flat, marking the first time in 4 months that they didn't decline.
A Look Ahead: This Week's Global Industry Classification Standard (GICS) Update
Since 1999, the GICS has been classifying stocks based on their sectors and industries, including most of the world's equities.
As of Monday, the S&P 500 has adjusted its sectors to change telecom into communications services and moved several big stocks into new classifications. This move is the largest GICS change since 1999 and is partly an attempt to reduce tech stocks' weight in the markets. As technology companies have grown in the past few years, they have come to represent 26% of the S&P 500. Some experts believe that is an unbalanced level and allows tech to have too much influence on the markets.
The GICS reclassification affects many notable companies, including Facebook, Netflix, Alphabet, and Twitter. They all now join the new communications services sector. This sector name change may not actually alter the sway that technology companies have on the markets, but it will likely have other effects on investors. In the near term, volatility may increase as stocks move to new industries and fund managers adjust their holdings.
Many factors determine the reclassification's specific effects on individual investors, so if you have questions about your portfolio, please let us know. We want to ensure you understand what you hold - and why - and how we are helping you adapt to both short- and long-term changes. If you would like guidance on any of the details we've shared today, we are always ready to help.
Tuesday: Consumer Confidence
Wednesday: New Home Sales, FOMC Meeting Announcement
Thursday: Durable Goods Orders, GDP, Jobless Claims
Friday: Personal Income and Outlays, Consumer Sentiment
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.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
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