Stocks saw another week of record highs. Through the close Friday, the Dow gained 0.7%, the S&P rose 0.9%, and the Nasdaq had a solid 2.1% gain. Bond prices were down slightly as money moved out of bonds and into stocks. Gold saw a slight gain of 0.1%. Oil was higher again, rising 1.7% to $69.88 per barrel. The international Brent oil closed up to $77.45.
Friday was also the last day of August, which is usually a pretty rough month for stocks. However, this August was the best one since 2014 for the Dow and S&P and the best for the Nasdaq (which has a large amount of tech stocks) since 2000.
Here’s a longer look at the rise in the S&P:
Here’s a longer look at the rise in the S&P:
There weren’t a lot of economic-related stories moving stocks this week. The big moves came on news from the trade front.
Monday saw big gains in the market when an agreement on trade with Mexico was announced. This was important because it showed that despite all the negative press, the trade process is moving in the right direction.
Despite Mexico being on board, investors wanted to see if Canada would be part of the trade deal, too. By the end of the week, it looked like a deal including Canada would not happen before their self-imposed Friday deadline. However, it appeared progress was being made and the markets welcomed that development.
While stocks moved higher on positive trade news with Mexico, stocks fell on Thursday after President Trump indicated that $200 billion in tariffs on Chinese imports into the country could come as soon as next week. Right now we have tariffs on $50 billion in goods, so $200 is quite an escalation. This Chinese trade story looks like it could take a while to play out and may get uglier from here.
Besides news on trade, the only other news of the week was several positive economic reports.
First, GDP for the second quarter was revised higher to 4.2% from an already-high 4.1% first estimate.
Monday saw big gains in the market when an agreement on trade with Mexico was announced. This was important because it showed that despite all the negative press, the trade process is moving in the right direction.
Despite Mexico being on board, investors wanted to see if Canada would be part of the trade deal, too. By the end of the week, it looked like a deal including Canada would not happen before their self-imposed Friday deadline. However, it appeared progress was being made and the markets welcomed that development.
While stocks moved higher on positive trade news with Mexico, stocks fell on Thursday after President Trump indicated that $200 billion in tariffs on Chinese imports into the country could come as soon as next week. Right now we have tariffs on $50 billion in goods, so $200 is quite an escalation. This Chinese trade story looks like it could take a while to play out and may get uglier from here.
Besides news on trade, the only other news of the week was several positive economic reports.
First, GDP for the second quarter was revised higher to 4.2% from an already-high 4.1% first estimate.
Consumer confidence hit its highest level since 2000:
In an interesting report, the percent of workers satisfied with their jobs hit its highest level since 2006:
Also, a government report on corporate profits showed they had their largest gains in six years:
Lastly, personal income and spending numbers both rose while an inflation report (the PCE, which is the Fed’s preferred inflation gauge) hit its highest level since 2012.
Next Week
Next week looks to be a little busier as we get data from the month just ended. We’ll get info on the strength of the manufacturing and service sectors, trade, and the monthly employment report.
Investment Strategy
No change here. The broader market appears to be on the expensive side in the short term. We aren’t actively buying the market here, but aren’t selling either. There are a handful of individual stocks that appear to be on the cheap side, though.
Next week also starts September, which is historically the worst month of the year for stocks. The average return in September is -1% and it has been lower 50 of the last 91 years according to Dow Jones Market Data. We wouldn’t be surprised to see it get a little more volatile from here.
There is no change in our longer term forecast, which remains difficult to predict. Fundamentals are still very good with pro-business policies out of Washington providing a solid tailwind. However, rising interest rates have historically pulled markets lower. It’s tough to say where we think the market will go the long run.
Bonds are also volatile at this time. Yields have risen recently (and prices have fallen), but we don’t think prices will fall much further and continue to trade in the range they have been in for the last several months.
As for the rest of the portfolio, bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. Floating-rate bonds will do well if interest rates do rise.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. We keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising on geopolitical issues as a flight to safety.
Finally, in international stocks, we prefer developed markets to emerging ones at this time.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
Next Week
Next week looks to be a little busier as we get data from the month just ended. We’ll get info on the strength of the manufacturing and service sectors, trade, and the monthly employment report.
Investment Strategy
No change here. The broader market appears to be on the expensive side in the short term. We aren’t actively buying the market here, but aren’t selling either. There are a handful of individual stocks that appear to be on the cheap side, though.
Next week also starts September, which is historically the worst month of the year for stocks. The average return in September is -1% and it has been lower 50 of the last 91 years according to Dow Jones Market Data. We wouldn’t be surprised to see it get a little more volatile from here.
There is no change in our longer term forecast, which remains difficult to predict. Fundamentals are still very good with pro-business policies out of Washington providing a solid tailwind. However, rising interest rates have historically pulled markets lower. It’s tough to say where we think the market will go the long run.
Bonds are also volatile at this time. Yields have risen recently (and prices have fallen), but we don’t think prices will fall much further and continue to trade in the range they have been in for the last several months.
As for the rest of the portfolio, bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. Floating-rate bonds will do well if interest rates do rise.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. We keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising on geopolitical issues as a flight to safety.
Finally, in international stocks, we prefer developed markets to emerging ones at this time.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
