Markets came off their record highs this week. For the week, the Dow was down a slight 0.2%, the S&P was lower by 1.0%, and the Nasdaq fell 2.6%. Bond prices were down slightly as yields rose. Gold had another small gain, up 0.1%. Oil turned lower, down 2.8% to $67.86 per barrel. The international Brent oil closed down slightly to $77.10.
September is historically the worst month for stocks and this this first week of the month helped confirm that reputation.
Trade worries again weighed on stocks this week.
Last week, a trade agreement was made with Mexico and there were hopes that Canada would join, too. That didn’t happen, but it looked like progress was being made.
Over the long weekend, President Trump took a tough stance on that trade deal:
Last week, a trade agreement was made with Mexico and there were hopes that Canada would join, too. That didn’t happen, but it looked like progress was being made.
Over the long weekend, President Trump took a tough stance on that trade deal:
This tougher stance worried investors, since they thought an agreement was possible any day. The talks continued this week, but we didn’t hear any progress being made. It looks like this may be with us a while.
There were also concerns that $200 billion in new tariffs would be placed on Chinese imports this week. Right now there is a tariff on $50 billion in imports, so an additional $200 billion would really be escalating the trade war and add to market volatility.
Those new tariffs weren’t implemented this week, but on Friday President Trump ratcheted up the rhetoric when he told reporters that once the $200 billion tariff is implemented, he was ready with another $267 billion. Stocks fell sharply on the news.
Rounding up the bad news, tech stocks had a particularly rough week, their worst since March.
Social media companies were in focus as their executives were in Washington and received a grilling by lawmakers on both sides of the aisle. There are concerns that more regulations are possible and though remote, it gave investors a reason to sell some stocks and lock in gains.
Continuing with the tech theme, Amazon was in the news as it became the second company to reach a trillion dollar valuation (the market value of a company is found by multiplying the share price by the amount of shares outstanding). It reached this level very quickly as the stock has risen more than 70% this year alone.
There were also concerns that $200 billion in new tariffs would be placed on Chinese imports this week. Right now there is a tariff on $50 billion in imports, so an additional $200 billion would really be escalating the trade war and add to market volatility.
Those new tariffs weren’t implemented this week, but on Friday President Trump ratcheted up the rhetoric when he told reporters that once the $200 billion tariff is implemented, he was ready with another $267 billion. Stocks fell sharply on the news.
Rounding up the bad news, tech stocks had a particularly rough week, their worst since March.
Social media companies were in focus as their executives were in Washington and received a grilling by lawmakers on both sides of the aisle. There are concerns that more regulations are possible and though remote, it gave investors a reason to sell some stocks and lock in gains.
Continuing with the tech theme, Amazon was in the news as it became the second company to reach a trillion dollar valuation (the market value of a company is found by multiplying the share price by the amount of shares outstanding). It reached this level very quickly as the stock has risen more than 70% this year alone.
Apple was the first company to reach this valuation just a month ago and it still remains the largest company. However, at the pace Amazon is growing, it won’t be long before Amazon becomes the largest company out there.
Lastly, economic news this week was solid. Worker productivity increased at its best pace in three years, the strength of the manufacturing sector hit its highest level in 14 years while the strength of the service sector also remains strong.
The always important employment report also came on Friday, showing the economy added 201,000 jobs over the last month. Wage growth came in at its highest level in nine years. Things are good right now – CNBC even called this the best job market in a generation!
Next Week
Next week will again be a little busier. Trade is bound to remain in a big topic. Plus we’ll get economic data on inflation, retail sales, industrial production, and another look at employment.
The Fed will also be in the news as many regional presidents will be making speeches and they will also release their Beige Book report, which takes an anecdotal look at the strength of the economy.
Investment Strategy
No change here. Stocks have come off their recent highs and may have a bit of room to move lower. We don’t see the signs of a large pullback coming so we aren’t selling here, but we’d wait before putting any new money into the broader market. There are a handful of individual stocks that appear to be on the cheap side, though.
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 will again be a little busier. Trade is bound to remain in a big topic. Plus we’ll get economic data on inflation, retail sales, industrial production, and another look at employment.
The Fed will also be in the news as many regional presidents will be making speeches and they will also release their Beige Book report, which takes an anecdotal look at the strength of the economy.
Investment Strategy
No change here. Stocks have come off their recent highs and may have a bit of room to move lower. We don’t see the signs of a large pullback coming so we aren’t selling here, but we’d wait before putting any new money into the broader market. There are a handful of individual stocks that appear to be on the cheap side, though.
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.
