Stocks Up as Milestone Passes

Last week, the east coast prepared for Hurricane Florence, which roared through the Carolinas. As investors kept their eyes on the weather, and its potential for destruction, estimates emerged of up to $27 billion in hurricane damage. This potential for damage contributed to insurance companies in the S&P 500 declining last week.[1] While the hurricane likely won't have a large effect on our economy, its destruction could influence data for months to come.[2]

Meanwhile, last week brought another milestone in our economy -- the tenth anniversary of Lehman Brothers' bankruptcy. 

For 158 years, the Wall Street firm weathered the markets' changes. By 2008, however, various challenges, including excessive risk taking, led to its demise. The firm's unexpected bankruptcy announcement shocked investors and triggered market panic, leading what was a simmering financial crisis to become the Great Recession. A decade later, the markets are on more solid ground, and banks hold more capital and have stronger regulation. While some professionals or analysts warn of a potential looming recession, current market performance and economic data indicate just how far we've come.[3] 

Let's examine last week's data to understand examples of where we are today: Domestic indexes rebounded to post healthy gains for the week, with the S&P 500 adding 1.16%; the Dow gaining 0.92%; and the NASDAQ increasing 1.36%.[4] International stocks in the MSCI EAFE were also up, gaining 1.76%.[5]

In addition, we received the following updates, which support a picture of a more robust economy:

  • Consumer sentiment jumped: The September reading was at its second-highest point since 2004. The data reveals that consumers expect the economy to grow and create more jobs.[6] 

  • Retail sales stalled but are primed for growth: Spending barely increased in August, after months of strong growth. However, analysts believe this data is "a blip" rather than an emerging trend, as tax cuts and a healthy labor market leave Americans with money in their pockets.[7] 

  • Industrial production rose for the 3rd-straight month: Auto manufacturing contributed to higher than expected industrial production in August. For now, trade tensions have not yet hurt this sector.[8]  

These data reports may not show blockbuster growth, but together they indicate our economy is doing well. In fact, they were strong enough to lead many economists and analysts to increase their projections of how fast the economy expanded during the 3rd quarter.[9] 

Looking back, the markets have come far from where they were 10 years ago, but risks will always remain, as Hurricane Florence and Lehman Brothers remind us. Today, and in the future, we are here to help you understand where you are and plan for whatever may lie ahead. 
Also, for those affected by the hurricane, we're ready to support your recovery and provide the financial guidance you seek. 

ECONOMIC CALENDAR

  • Tuesday: Housing Market Index  

  • Wednesday: Housing Starts

  • Thursday: Existing Home Sales, Jobless Claims



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 indices from Europe, Australia, and Southeast Asia.  

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.

A recession is a significant decline in activity across the economy, lasting longer than a few months.  The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.

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.

These are the views of Platinum Advisor Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither 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.


[1] fortune.com/2018/09/11/hurricane-florence-stock-market/
[2] www.bloomberg.com/news/articles/2018-09-12/florence-to-batter-u-s-data-but-harm-to-economy-likely-small 
[3] money.cnn.com/2018/09/14/investing/lehman-brothers-2008-crisis/index.html
[4] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
[5] www.msci.com/end-of-day-data-search
[6] www.cnbc.com/2018/09/14/september-consumer-sentiment.html
[7] www.marketwatch.com/story/retail-sales-grow-by-smallest-amount-in-six-months-but-spending-primed-to-rebound-2018-09-14 
[8] www.marketwatch.com/story/us-industrial-production-up-for-third-straight-month-on-strength-in-autos-2018-09-14
[9] www.bloomberg.com/news/articles/2018-09-14/retail-sales-factory-output-signal-steady-u-s-economic-growth?srnd=markets-vp


A Shaky Start to September

Domestic markets fell last week due to negative trade news and declining tech stocks, with the S&P 500 and Dow both breaking their multi-week winning streaks. Meanwhile, the NASDAQ posted losses for four days in a row for the first time since April and experienced its worst September start since 2008.[1]Overall, the S&P 500 lost 1.03%; the Dow dropped 0.19%; and the NASDAQ gave back 2.55% for the week.[2]  International stocks in the MSCI EAFE also declined, losing 2.89%.[3]

The CBOE Volatility Index (VIX), which can help gauge market fears, increased 15.8% last week.[4] This increase matches what often occurs during September, when volatility returns after waning during the summer months. In fact, since 2007, volatility has been above average in September.[5] 

Of course, the change from one month or season to another isn't enough to trigger market losses and rising volatility. Let's analyze what drove these experiences last week. 

1. Trade tension escalated between the U.S. and China. 
The U.S. is getting closer to resolving trade issues with Mexico, Canada, and the European Union, and the countries may unite against China's trade approach. As a result, the likelihood of calming the trade dispute between the U.S. and China is fading.[6] Last week, President Trump said he was prepared to add tariffs to another $267 billion in Chinese goods. These tariffs would be in addition to the $200 billion that may launch soon, which one expert said could reduce the S&P 500 by 5%.[7] 

2. Tech stocks dropped. 
Last week, the technology sector declined by 2.9%.[8] Tech has performed better than any other sector this year and has been a market leader for three years, but concerns about increasing regulation -- with a focus on social media companies -- weighed on investors' minds last week.[9] 

3. Wage growth increased.
The latest jobs report surpassed expectations, with the economy adding 201,000 jobs in August. Year-over-year wage growth also rose more than expected and hit its fastest pace since 2009.[10] This wage increase contributed to stock losses, because it could mean that 2018 will have two additional interest rate increases, with more on the horizon for 2019.[11] 

Last week certainly provided data and headlines for investors to digest, but the job market, economic fundamentals, and market remain strong.[12] For the moment, we'll continue to review the data we receive and seek new ways to help you prepare for what lies ahead. 

ECONOMIC CALENDAR

  • Tuesday: JOLTS 

  • Thursday: CPI, Jobless Claims

  • Friday: Retail Sales, Industrial Production, Consumer Sentiment



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 indices from Europe, Australia, and Southeast Asia.

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.

VIX is a trademarked ticker symbol for the CBOE Volatility Index, a popular measure of the implied volatility of S&P 500 index options; the VIX is calculated by the Chicago Board Options Exchange (CBOE). Often referred to as the fear index or the fear gauge, the VIX represents one measure of the market's expectation of stock market volatility over the next 30-day period.

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.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither 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.

[1] www.cnbc.com/2018/09/07/us-markets-jobs-report-and-data-in-focus.html
[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
[3] www.msci.com/end-of-day-data-search
[4] www.cnbc.com/2018/09/07/us-markets-jobs-report-and-data-in-focus.html
[5] www.bloomberg.com/news/articles/2018-09-07/summer-s-end-breaks-s-p-500-s-momentum-as-tech-trade-war-bite?srnd=markets-vp
[6] www.marketwatch.com/story/near-term-likelihood-of-us-china-trade-pact-seen-dimming-2018-09-07
[7] www.bloomberg.com/news/articles/2018-09-07/summer-s-end-breaks-s-p-500-s-momentum-as-tech-trade-war-bite?srnd=markets-vp
[8] www.marketwatch.com/story/stock-futures-point-to-lower-open-after-jobs-report-sp-500-could-have-4th-down-day-2018-09-07?dist=markets
[9] www.cnbc.com/2018/09/07/us-markets-jobs-report-and-data-in-focus.html
[10] wsj-us.econoday.com/byshoweventfull.asp?fid=485659&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
[11] www.marketwatch.com/story/stock-futures-point-to-lower-open-after-jobs-report-sp-500-could-have-4th-down-day-2018-09-07?dist=markets
[12] www.marketwatch.com/story/stock-futures-point-to-lower-open-after-jobs-report-sp-500-could-have-4th-down-day-2018-09-07?dist=markets