Year End Special Edition | A Look Back at 2018

The Weekly Update

Week of December 31, 2018
By Christopher T. Much, CFP®, AIF®

The close of the year provides an opportunity for investors to step back and consider the wider financial landscape. This week, we’re reviewing some key issues that defined 2018, as well as some factors that may influence financial markets in the coming year.

Year in Review

Wall Street began 2018 in rally mode, as enthusiasm for the 2017 Tax Cuts and Jobs Act spilled over into the New Year. Strong economic news encouraged investors, who put aside fears that rising inflation may lead to higher interest rates. What Wall Street did not see coming were the spring and summer trade disputes with China, Canada, Mexico, and the European Union. Fear of a global economic slowdown contributed to a sharp decline in stock prices in October. U.S. economic growth forecasts were tempered in November for 2019, with bull and bears engaged in a fierce tug-of-war as the year ended.

Economic Growth

After expanding at a middling 2.2% pace in the first quarter, the Gross Domestic Product (GDP) rose 4.2% in Q2 and 3.4% in Q3. The Federal Reserve Bank of Atlanta forecasted a 2.7% increase for Q4, which will be released on January 30, 2019 by the Bureau of Economic Analysis. The Congressional Budget Office expects GDP growth in 2019 to slow to 2.4% “as growth in business investment and government purchases slows.”

Interest Rates

At the close of its September 2018 meeting, the Federal Reserve raised the federal funds rate to 2.25%, a full percentage point higher than it was a year earlier. Federal Reserve Chair Jerome Powell appeared to change his stance on monetary policy, saying interest rates were “just below” a neutral level. Previously, he indicated rates were a “long way” from neutral.

Consumer Prices and Wage Growth

The number of future interest rate hikes by the Fed may largely depend on its reading of inflation. An uptick in consumer prices or an increase in wage growth may prompt the Fed to consider additional hikes in 2019.

Trade Talk Progress

Tariffs were a highlight of 2018 news. On July 10, the Trump administration announced a list of tariffs on $200 billion in Chinese goods. The escalating trade dispute between the U.S. and China is an enormous overhang on the financial markets. The continuing impasse may affect economic growth and push consumer prices higher.

2018 also was a year in which a major trade pact started to come together. The United States-Mexico-Canada Agreement (USMCA) was approved in principle in October. However, the agreement must be approved by Congress and the legislative bodies of Mexico and Canada before it can take effect.

U.S. Dollar

Rising interest rates and robust domestic growth in 2018 lead to a strengthening of the U.S. dollar. A strong U.S. dollar can negatively affect profits of U.S.-based multinational companies, since it can make their products more expensive to overseas buyers. This will also be something to watch in the coming year.

Real Estate

The trend of higher interest rates in 2018 was also felt in the real estate market. The average rate on a 30-year conventional home loan stood at 3.95% in January 2018. At year’s end, it was hovering near 5% according to Freddie Mac.

We hope you enjoyed this look back at 2018! Next week, we’ll be back to covering the market numbers.

Past performance is no guarantee of future results. Data collected from Investors FastTrack software.
https://www.cnbc.com/2018/11/20/jp-morgan-sees-a-slowdown-coming-with-economy-growing-at-less-than-2-percent-in-2019.html
https://tradingeconomics.com/united-states/gdp-growth
https://www.frbatlanta.org/cqer/research/gdpnow.aspx
https://www.bea.gov/news/schedule
https://www.cnbc.com/2018/08/14/us-economy-seen-strong-in-2018-to-slow-in-2019-cbo.html
https://www.marketwatch.com/story/seemingly-dovish-powell-says-interest-rates-are-just-below-level-where-they-wont-stimulate-economy-2018-11-28
https://www.marketwatch.com/story/seemingly-dovish-powell-says-interest-rates-are-just-below-level-where-they-wont-stimulate-economy-2018-11-28
https://www.cnbc.com/2018/07/10/white-house-releases-list-of-goods-hit-by-200-billion-in-tariffs.html
https://www.businessinsider.com/us-canada-mexico-trade-deal-usmca-nafta-congress-vote-block-2018-10
https://qz.com/1511247/the-us-dollars-unexpected-strength-stands-out-in-the-market-wreckage-of-2018/
https://m.benzinga.com/article/12500556
http://www.freddiemac.com/pmms/archive.html
Year End Special Edition | A Look Back at 20182018-12-31T12:56:02-04:00

Stocks Down, Change Ahead?

The Weekly Update

Week of December 17, 2018
By Christopher Much, CFP®, AIF®

Last week brought more volatility to the markets. While domestic indexes had some rallies as positive trade news emerged earlier in the week, by Friday, December 14, they had erased any gains. The last time major U.S. indexes ended in correction territory was March 2016, meaning they are now at least 10% below their highs from the past year.

For the week, the S&P 500 dropped 1.26%, the Dow lost 1.18%, and the NASDAQ declined 0.84%. International stocks in the MSCI EAFE also had a 0.89% weekly loss.

Why did markets struggle last week?
With last week’s declines, the S&P 500 was in the midst of its worst December since 2002. Concerns about global growth fueled much of the declines as China and Europe released economic data that missed projections. The ongoing trade tension contributed to slower growth in China, which drove some investors to worry about U.S. growth, as well.

We did, however, receive solid domestic data last week, including a healthy retail sales report. But, through the week, investors seemed less interested in this data and positive trade updates, focusing instead on understanding the global economy’s standing.

What might be ahead?
This week presents a potentially significant event for domestic markets: the Federal Reserve’s commentary after its latest meeting. The Fed will likely raise interest rates during the meeting, which would be the 9th increase since December 2015. Markets expect this hike, but what investors aren’t sure about is how the Fed will describe its plan for 2019. Some analysts believe that if the Fed indicates it will pause or slow rate hikes next year, we could see a sizable “Santa Claus rally” through the end of December.

For short-term traders, predicting whether 2018 will stay in negative territory or stocks will end the year on a surge is in many ways a guessing game. What we are here to do is help you manage your investments for the long term. We will follow this week’s developments closely and strive to determine how they may affect the economy going forward. Ultimately, we are focusing on your goals not just through the year, but for the rest of your life.

ECONOMIC CALENDAR:
Monday: Housing Market Index
Tuesday: Housing Starts
Wednesday: Existing Home Sales, FOMC Meeting Announcement
Thursday: Jobless Claims
Friday: GDP, Durable Goods Orders, Consumer Sentiment

Past performance is no guarantee of future results. Data collected from Investors FastTrack software.
https://www.cnbc.com/2018/12/14/us-stock-futures-dow-jones-sp-500-nasdaq-to-open-lower-on-friday.html
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.msci.com/end-of-day-data-search
https://www.reuters.com/article/us-usa-stocks-weekahead/wall-st-looks-to-fed-outlook-wednesday-for-early-christmas-gift-idUSKBN1OD2E7
https://www.cnbc.com/2018/12/14/us-stock-futures-dow-jones-sp-500-nasdaq-to-open-lower-on-friday.html
https://www.reuters.com/article/us-usa-stocks/wall-st-tumbles-on-global-growth-worries-jj-decline-idUSKBN1OD1HP
https://www.bloomberg.com/news/articles/2018-12-13/asia-stocks-to-dip-as-rally-stalls-dollar-climbs-markets-wrap?srnd=markets-vp
https://www.reuters.com/article/us-usa-stocks-weekahead/wall-st-looks-to-fed-outlook-wednesday-for-early-christmas-gift-idUSKBN1OD2E7
Stocks Down, Change Ahead?2018-12-24T12:42:10-04:00

Stocks Down, Change Ahead?

The Weekly Update

Week of December 17, 2018
By Christopher Much, CFP®, AIF®

Last week brought more volatility to the markets. While domestic indexes had some rallies as positive trade news emerged earlier in the week, by Friday, December 14, they had erased any gains. The last time major U.S. indexes ended in correction territory was March 2016, meaning they are now at least 10% below their highs from the past year.

For the week, the S&P 500 dropped 1.26%, the Dow lost 1.18%, and the NASDAQ declined 0.84%. International stocks in the MSCI EAFE also had a 0.89% weekly loss.

Why did markets struggle last week?
With last week’s declines, the S&P 500 was in the midst of its worst December since 2002. Concerns about global growth fueled much of the declines as China and Europe released economic data that missed projections. The ongoing trade tension contributed to slower growth in China, which drove some investors to worry about U.S. growth, as well.

We did, however, receive solid domestic data last week, including a healthy retail sales report. But, through the week, investors seemed less interested in this data and positive trade updates, focusing instead on understanding the global economy’s standing.

What might be ahead?
This week presents a potentially significant event for domestic markets: the Federal Reserve’s commentary after its latest meeting. The Fed will likely raise interest rates during the meeting, which would be the 9th increase since December 2015. Markets expect this hike, but what investors aren’t sure about is how the Fed will describe its plan for 2019. Some analysts believe that if the Fed indicates it will pause or slow rate hikes next year, we could see a sizable “Santa Claus rally” through the end of December.

For short-term traders, predicting whether 2018 will stay in negative territory or stocks will end the year on a surge is in many ways a guessing game. What we are here to do is help you manage your investments for the long term. We will follow this week’s developments closely and strive to determine how they may affect the economy going forward. Ultimately, we are focusing on your goals not just through the year, but for the rest of your life.

ECONOMIC CALENDAR:
Monday: Housing Market Index
Tuesday: Housing Starts
Wednesday: Existing Home Sales, FOMC Meeting Announcement
Thursday: Jobless Claims
Friday: GDP, Durable Goods Orders, Consumer Sentiment

Past performance is no guarantee of future results. Data collected from Investors FastTrack software.
https://www.cnbc.com/2018/12/14/us-stock-futures-dow-jones-sp-500-nasdaq-to-open-lower-on-friday.html
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.msci.com/end-of-day-data-search
https://www.reuters.com/article/us-usa-stocks-weekahead/wall-st-looks-to-fed-outlook-wednesday-for-early-christmas-gift-idUSKBN1OD2E7
https://www.cnbc.com/2018/12/14/us-stock-futures-dow-jones-sp-500-nasdaq-to-open-lower-on-friday.html
https://www.reuters.com/article/us-usa-stocks/wall-st-tumbles-on-global-growth-worries-jj-decline-idUSKBN1OD1HP
https://www.bloomberg.com/news/articles/2018-12-13/asia-stocks-to-dip-as-rally-stalls-dollar-climbs-markets-wrap?srnd=markets-vp
https://www.reuters.com/article/us-usa-stocks-weekahead/wall-st-looks-to-fed-outlook-wednesday-for-early-christmas-gift-idUSKBN1OD2E7
Stocks Down, Change Ahead?2018-12-24T12:41:32-04:00

How Cannabis Can Make You Feel Good About Your Investments

How Cannabis Can Make You Feel Good About Your Investments

Legal in 31 states and Canada for medicinal purposes and 10 states and DC for recreation, cannabis is peaking interest for potential growth and investment opportunity. With growing acceptance, this is no longer a societal fad, but a paradigm shift. http://bit.ly/Cannabis_ETF

How Cannabis Can Make You Feel Good About Your Investments2018-12-13T10:20:09-04:00

Volatility Continues

The Weekly Update

Week of December 10, 2018
By Christopher Much, CFP®, AIF®

Markets went for another wild ride last week, as major domestic indexes swung back and forth. By Friday, December 7, markets had posted their worst weekly performance since March—and the S&P 500 and Dow both moved into negative territory for 2018.

Overall, the S&P 500 lost 4.60%, the Dow declined 4.50%, and the NASDAQ dropped 4.92%. International stocks in the MSCI EAFE also struggled, posting a 2.27% weekly loss.

Let’s take a look at what is driving this challenging market performance.

Examining Recent Volatility

1. How volatile are stocks right now?
If recent market fluctuations have felt intense to you, there’s a reason: They are. The past three weeks have had the most volatility since 2008’s financial crisis. During this time, domestic indexes have ricocheted between gains and losses. The large swings have occurred both week-to-week and within daily trading.

2. What is causing the volatility?
Many of the same themes we’ve discussed throughout 2018 are continuing to affect market behavior. Ultimately, many investors are worried that corporate profits and global growth will suffer if trade tension persists and the Federal Reserve continues raising interest rates.

Concerns about Treasury yields were also on investors’ minds. For part of last week, 3-year Treasury notes had higher yields than 5-year notes. Called an inversion, a higher yield on shorter-term Treasuries can be a sign of a coming recession. The yield spread between 2-year and 10-year Treasury notes, which people focus on more, has not inverted.

3. Should you feel concerned?
With many headlines to digest, from conspiracy charges against a Chinese tech leader to comments from the Fed, investors had a lot to consider last week. The difference is how they reacted to this information. For some time, markets were basically ignoring headlines. Now, they’ve moved in the opposite direction into what one investment manager called “a period of hypersensitivity.”

Consequently, recent market performance may seem unnerving. As is often the case, however, the reality may be less extreme than what appears at first glance, especially when you look at the fundamentals.

4. What do the fundamentals tell us?
While last week’s market performance saw large fluctuations, the fundamentals we received were far less dramatic. We learned that two sectors beat expectations in November: manufacturing and service. Further, the November labor report revealed fewer new jobs than anticipated, but unemployment is still at historically low levels, as job and wage growth continue.

Remember, risks exist in the markets and economy, and we’re analyzing these details closely. If you have any questions about your financial standing or anything you hear in the news, we are here to talk.

ECONOMIC CALENDAR:
Monday: JOLTS
Tuesday: PPI-FD
Wednesday: CPI
Thursday: Jobless Claims
Friday: Retail Sales, Industrial Production

Past performance is no guarantee of future results. Data collected from Investors FastTrack software.
https://www.cnbc.com/2018/12/07/stock-market-dow-futures-fall-ahead-of-unemployment-figures.html
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.msci.com/end-of-day-data-search
https://www.bloomberg.com/news/articles/2018-12-07/stocks-drubbing-vexes-fund-managers-as-year-end-pressure-mounts?srnd=premium
https://www.bloomberg.com/news/articles/2018-12-07/stocks-drubbing-vexes-fund-managers-as-year-end-pressure-mounts?srnd=premium
https://www.cnbc.com/2018/12/07/stock-market-dow-futures-fall-ahead-of-unemployment-figures.html
https://www.bloomberg.com/news/articles/2018-12-06/asia-signals-mixed-start-for-stocks-yields-drop-markets-wrap?srnd=markets-vp
https://www.cnbc.com/2018/12/07/stock-market-dow-futures-fall-ahead-of-unemployment-figures.html
https://www.ftportfolios.com/Commentary/EconomicResearch/2018/12/3/the-ism-manufacturing-index-rose-to-59.3-in-november
https://www.ftportfolios.com/Commentary/EconomicResearch/2018/12/6/the-ism-non-manufacturing-index-rose-to-60.7-in-november
http://wsj-us.econoday.com/byshoweventfull.asp?fid=485662&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
Volatility Continues2018-12-10T12:56:29-04:00

Markets Rebound

The Weekly Update

Week of December 3, 2018
By Christopher T. Much, CFP®, AIF®

U.S. markets ended a volatile month on a high note Friday. All three major indices posted impressive increases for the week, buoyed by news from the Fed Reserve and international trade. The S&P 500 jumped 4.85%, and the NASDAQ finished up 5.64%—both gains are almost 7-year highs. Meanwhile, the Dow experienced a 2-year high, increasing 5.16%. Internationally, the MSCI EAFE rose 0.95%.

To better understand last week’s sharp rebound, let’s take a closer look at details surrounding comments by Fed Chairman Jerome Powell and various international developments.

Fed Developments

Last Wednesday, Powell inspired optimism in investors by claiming that interest rates are close to the current neutral range of 2.5–3.5%. His comments seemed to suggest that the Fed may throttle back interest rate hikes. However, minutes released on Thursday from the central bank’s meeting contained no indication that the Fed had changed its policy. Therefore, we can only assume the Fed still plans on a fourth rate hike in 2018, and increases may continue during 2019, but we need to wait for more clarity from the Fed.

The G20 Summit

At the annual G20 summit, leaders from the world’s 19 biggest economies and the European Union assembled in Buenos Aires. This group represents 85% of the world’s economic output and 2/3 of its population. Here are a few key takeaways from the summit:

  • United States–Mexico–Canada Agreement
    On November 30, President Trump met with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto. They signed the anticipated United States¬–Mexico–Canada Agreement (USMCA) to replace NAFTA. With the recent U.S. tariffs on Canadian steel and aluminum causing tension, the USMCA may start to ease the strain, although some remain skeptical. Plus, the agreement still needs to pass Congress. Its true outcome is still unknown.
  • Trade Talks with China
    President Trump and China’s President Xi met on December 1 to attempt resolving trade issues between the two countries. Since last July, the U.S. has hit Chinese goods with a total of $250 billion in tariffs and has threatened more. In turn, China retaliated by imposing $110 billion in tariffs on U.S. products. Ultimately, both countries agreed to delay any increases in tariffs for 90 days, while they attempt to iron out remaining disputes. If they cannot reach an agreement, President Trump says he will raise rates from 10% to 25%.
  • Other G20 Concerns
    Low oil prices and oversupply continue to worry investors. The leaders from two of the three largest oil-producing countries, Russia and Saudi Arabia, met to discuss reducing production and raising prices. In addition to trade issues and oil, G20 leaders are grappling with different views on climate change and the new spat between Russia and the Ukraine.

Stay Focused

While the Fed and geopolitical issues dominate the news cycle, we’re here to remind you to keep market fundamentals in mind. As a whole, the economy looks strong through 2018. For example, last week we learned:

  • Consumer confidence remains high, though it fell slightly in November. This dip follows an 18-year sustained peak in positive territory.
  • Q3 Gross Domestic Product increased a solid 3.5%. Business investments performed better than expected, with corporate profits boosting to a new 6-year high.
  • Unemployment lowered to 3.7%, the lowest it has been in at least 48 years.

As always, we remain dedicated to helping you navigate your financial life amidst economic and geopolitical news. If you have questions about how this information may affect your portfolio, contact us today.

ECONOMIC CALENDAR:
Monday: PMI Manufacturing Index
Wednesday: ISM Non-Manufacturing Index
Thursday: Factory Orders

Past performance is no guarantee of future results. Data collected from Investors FastTrack software.
https://www.reuters.com/article/us-usa-stocks/wall-street-rises-on-trade-hopes-sp-nasdaq-post-best-weeks-in-7-years-idUSKCN1NZ1EZ
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.reuters.com/article/us-usa-stocks/wall-street-rises-on-trade-hopes-sp-nasdaq-post-best-weeks-in-7-years-idUSKCN1NZ1EZ
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
https://www.cnbc.com/2018/11/30/stocks-set-to-open-mixed-as-high-stakes-g-20-puts-trade-in-spotlight.html
https://www.msci.com/end-of-day-data-search
https://www.cnbc.com/2018/11/28/markets-see-fewer-rate-hikes-in-powell-comments.html
https://www.cnbc.com/2018/11/28/forex-markets-dollar-the-fed-us-china-trade-in-focus.html
https://www.bankrate.com/banking/federal-reserve/fomc-recap/
https://www.g20.org/en/g20/what-is-the-g20
https://www.reuters.com/article/us-g20-argentina-usmca/u-s-canada-mexico-sign-trade-deal-trump-shrugs-off-congress-hurdle-idUSKCN1NZ0HE
https://www.cnbc.com/2018/11/30/timeline-of-us-china-trade-war-as-trump-and-xi-meet-at-g-20-in-argentina.html
https://www.cnbc.com/2018/12/01/us-china-wont-impose-additional-tariffs-after-january-1-report.html
https://www.cnn.com/2018/11/30/investing/premarket-stocks-trading/index.html
http://fortune.com/2018/12/01/g20-statement-2018/
https://www.usatoday.com/story/opinion/2018/11/30/ukraine-conflict-trump-g-20-push-back-bully-putin-editorials-debates/2147851002/
https://seekingalpha.com/article/4225786-u-s-good-gets
https://www.marketwatch.com/story/consumer-confidence-falls-for-first-time-in-five-months-2018-11-27
https://www.marketwatch.com/story/economy-grew-35-in-third-quarter-pushes-corporate-profits-to-6-year-high-gdp-shows-2018-11-28
https://www.marketwatch.com/story/wages-may-show-strong-gain-in-november-jobs-report-and-wall-street-wont-like-it-2018-12-01
Markets Rebound2018-12-03T12:25:26-04:00