It was a solid week for the markets. Through the close Friday, the Dow gained a solid 2.8%, the S&P rose 1.6%, and the Nasdaq was higher by 1.2%. Bonds were relatively unchanged. Gold climbed 0.7% on the week. Oil moved lower for the third straight week, losing 0.4% to close at $65.56 per barrel. The international Brent oil, which is used to make much of the gas on the east coast, moved slightly lower to $76.34
The news cycle was fairly quiet most of the week. Without that news pushing the markets, the tailwind from the solid economy and rising earnings helped send stocks higher.
The S&P 500 stock index rose to its highest level in three months.
The S&P 500 stock index rose to its highest level in three months.
Meanwhile, a record high was hit in the tech-heavy Nasdaq market…
…and also in smaller stocks with the Russell 2000 index.
Markets briefly saw some pressure Friday when the G-7 summit began. These summits are normally mundane events where these countries gather to coordinate policies. As you’re probably well-aware, this meeting has generated a lot more buzz because of President Trump’s aggressive trade policies.
President Trump showed no signs of backing down as this meeting approached, either. The heads of Canada and France took to Twitter on Thursday to express their displeasure with the recently-announced tariffs, only to be met with a swift rebuke from the President.
While we’re sure something needs to be done on trade, we aren’t sure how this will play out (really, no one is sure). Either way, it could be a long process that can add some volatility to the market in the meantime.
Switching gears to economic data which was mostly positive this week. The trade deficit narrowed as we exported a record amount of oil. The strength of the service sector also moved a notch higher. This, combined with the manufacturing sector, has trended higher since 2016.
President Trump showed no signs of backing down as this meeting approached, either. The heads of Canada and France took to Twitter on Thursday to express their displeasure with the recently-announced tariffs, only to be met with a swift rebuke from the President.
While we’re sure something needs to be done on trade, we aren’t sure how this will play out (really, no one is sure). Either way, it could be a long process that can add some volatility to the market in the meantime.
Switching gears to economic data which was mostly positive this week. The trade deficit narrowed as we exported a record amount of oil. The strength of the service sector also moved a notch higher. This, combined with the manufacturing sector, has trended higher since 2016.
We also have an interesting development in the employment picture. Announced in the Jolts report (which reports on the amount of job openings to turnover) was that in the first time since they began keeping records in 2000, the number of job openings (6.7 million) exceeds the number of people unemployed (6.3 million).
This is interesting because there are plenty of jobs available but there is something that is keeping them from being filled – which is part of a much larger discussion. Some point to generous unemployment benefits, or a lack of qualified workers, or workers unable to meet the drug-test or criminal background requirements, or even employers offering too little pay. Either way, this is something that eventually needs to be addressed for the long-term health of the economy.
Finally, a new rule was passed this week that will likely affect everyone reading this newsletter. Regulators with the SEC approved a request for shareholder reports to be distributed online and no longer by mail.
Finally, a new rule was passed this week that will likely affect everyone reading this newsletter. Regulators with the SEC approved a request for shareholder reports to be distributed online and no longer by mail.
You know these reports and probably receive several a quarter. Fund companies have pushed for them to be delivered electronically since the costs in mailing them are not insignificant.
You won’t see any changes for several years, however. The new rule goes into effect in 2021 and they will still mail you a notice that the report is available online while also giving you the option to receive it in the mail if you wish.
Next Week
Next week is bound to have a lot of headlines impacting the market. The G-7 summit over the weekend will provide something for the markets as the week opens and Tuesday’s meeting with North Korea is likely to add to the volatility.
There will also be a Fed policy meeting with more than a 90% chance the Fed pulls back further on their stimulus by raising interest rates. Several other central banks around the world will also be holding their own policy meetings, which always have the potential to move our market markets here.
As for economic reports, we’ll get info on inflation with the CPI and PPI, retail sales, and industrial production.
Investment Strategy
The gains of the market this week put stocks into expensive territory in the short term. We think there is more of a chance of seeing the market stall or move lower from here than there is in it rising, so we’d hesitate to put new money in at this time.
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 are like Kryptonite to stocks and could pull 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 broken out higher in the last few weeks (so prices moved lower), but we think they are near the high end of their range right now.
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.
You won’t see any changes for several years, however. The new rule goes into effect in 2021 and they will still mail you a notice that the report is available online while also giving you the option to receive it in the mail if you wish.
Next Week
Next week is bound to have a lot of headlines impacting the market. The G-7 summit over the weekend will provide something for the markets as the week opens and Tuesday’s meeting with North Korea is likely to add to the volatility.
There will also be a Fed policy meeting with more than a 90% chance the Fed pulls back further on their stimulus by raising interest rates. Several other central banks around the world will also be holding their own policy meetings, which always have the potential to move our market markets here.
As for economic reports, we’ll get info on inflation with the CPI and PPI, retail sales, and industrial production.
Investment Strategy
The gains of the market this week put stocks into expensive territory in the short term. We think there is more of a chance of seeing the market stall or move lower from here than there is in it rising, so we’d hesitate to put new money in at this time.
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 are like Kryptonite to stocks and could pull 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 broken out higher in the last few weeks (so prices moved lower), but we think they are near the high end of their range right now.
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.
