Markets Post Week of Growth

On Friday, the markets closed the week gaining traction. The Dow had seven consecutive days of growth, rising 2.34%, its largest weekly gain since March.[1] Meanwhile, the S&P 500 rose 2.41%; the NASDAQ jumped 2.68%; and the MSCI EAFE increased 1.41%.[2] 

Various factors came together to support the growth. From geopolitical topics to strong corporate earnings, we'll focus on three key developments that drove movement.

1. Energy Shares Boosted by Iran Nuclear Deal Withdrawal

President Trump's decision on Tuesday to withdraw from the Iran nuclear deal helped push the energy sector higher. With the possibility of renewed sanctions on the horizon, the anticipation of a pullback from global oil supplies helped boost prices. Though oil prices fell from a 3½-year high on Friday, it was the second week of growth, driving energy shares to rise 3.8%.[3]  

2. Technology Sector Jumps Amid Strong Corporate Earnings

After the technology sector's months of stagnation, fueled in part by recent fears over privacy, it is now approaching all-time highs. Since April 25th, the information technology sector has increased 9%. The movement is driving many investors to join the rally, while many analysts remain cautious.[4] Overall, the growth contributed 3.5%.[5]

This rally happened on the back of strong corporate earnings. Over 70% of S&P 500 companies reported earnings growth that exceeded expectations. Last week's positive reports helped push the index past 50- and 100-day moving averages.[6] 

3. Inflation Remains Steady

The Consumer Price Index (CPI), which measures the price of goods and services, rose only 0.2% for the month in April and 2.5% over the year. These reports both missed and met expectations, respectively.[7] The tepid growth caused some investors to worry that the Federal reserve would raise interest rates more quickly, as the U.S. dollar fell and held below its 2018 high.[8] Some analysts, however, believe that the missed expectations should ease the Fed's pressure to fast-track interest rates.[9] 

Looking Ahead

We will continue tracking geopolitical developments, from potential actions against Syria, tariffs on Iran, and preparations for President Trump's upcoming meeting with North Korea's Kim Jong-un.[10] In addition, key discussions around the American Free Trade Act and trade relationships with China remain on the horizon.[11] We also will gain our first insights on how well consumer spending performed in the second quarter.[12] 

If you would like to discuss any developments or gain a clearer understanding of how these issues may affect your portfolio, contact us today. We are always here to help you make sense of your financial life and gain clarity for the road ahead. 

ECONOMIC CALENDAR

  • Tuesday: Retail Sales, Housing Market Index
  • Wednesday: Housing Starts
  • Thursday: Initial Jobless Claims, Philadelphia Fed Business Outlook Survey, Bloomberg Consumer Comfort Index

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.

Consumer Price Index (CPI) measures prices of a fixed basket of goods bought by a typical consumer, widely used as a cost-of-living benchmark, and uses January 1982 as the base year.

The Federal Reserve System (also known as the Federal Reserve and, informally, as the Fed) is the central banking system of the United States. The Federal Reserve System is composed of 12 regional Reserve banks which supervise state member banks. The Federal Reserve System controls the Federal Funds Rate (aka Fed Funds Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.

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] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US

www.cnbc.com/2018/05/11/us-stock-futures-dow-data-oil-and-politics-on-the-agenda.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=@CCO

www.msci.com/end-of-day-data-search
[3] www.marketwatch.com/story/us-oil-prices-hover-at-3-12-year-highs-as-analysts-entertain-the-idea-of-100-crude-2018-05-11
www.cnbc.com/2018/05/11/us-stock-futures-dow-data-oil-and-politics-on-the-agenda.html
[4] www.cnbc.com/2018/05/11/wall-street-underestimates-how-strong-this-tech-rally-is-strategist.html
[5] www.cnbc.com/2018/05/11/us-stock-futures-dow-data-oil-and-politics-on-the-agenda.html
[6] www.bloomberg.com/news/articles/2018-05-11/better-late-than-never-for-s-p-500-as-tech-ignites-weekly-rally
[7] wsj-us.econoday.com/byshoweventfull.asp?fid=485631&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
[8] www.reuters.com/article/uk-global-forex/cpi-miss-keeps-dollar-below-2018-peak-sterling-falls-idUSKBN1IB027
[9] wsj-us.econoday.com/byshoweventarticle.asp?fid=494340&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
[10] www.cnbc.com/2018/04/12/asia-markets-trade-geopolitics-stocks-and-currencies-in-focus.html
www.cbsnews.com/news/tariffs-iran-sanctions-stoke-worries-of-a-global-slowdown/
 [11] wsj-us.econoday.com/byshoweventarticle.asp?fid=494339&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
[12] wsj-us.econoday.com/byshoweventarticle.asp?fid=494340&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

Examining Employment

Domestic indexes posted strong results on Friday, May 4th, as the latest labor report data lessened investors' concerns about inflation and interest rates. Nonetheless, stocks had mixed results last week.[1]The S&P 500 dropped 0.24%, and the Dow gave back 0.20%, which marked both indices' second week of losses in a row.[2] Thanks to a bounce in tech stocks, however, the NASDAQ gained 1.26%.[3]International stocks in the MSCI EAFE decreased by 0.57%.[4] 

Amid this relatively tepid performance, we reached a big milestone on May 1st: our current economic expansion is now officially the second longest on record. For eight years and 10 months, the economy has been growing, and many sectors still have room to advance.[5] 

As we look to better understand where we stand today, Friday's employment report provides key insights into our economic health.  

What We Learned About Employment

1. Growth Slowed

The report indicated that the economy added fewer jobs than expected in April, and average hourly wage growth also grew more slowly than forecast. Federal Reserve members watch this data closely to help anticipate changes in inflation.[6] 

2. Participation Dropped

The percentage of working-age people participating in the labor force dropped by 0.1%.[7] This decline may result from people retiring or returning to school but can also come from people choosing to stop looking for work. The lower participation rate may contradict some of the more positive trends we've seen recently.[8]  

3. Unemployment Declined

Despite missing growth projections, unemployment fell to 3.9%, the lowest point in 18 years.[9] The rate has only dropped below 4% during three other periods.[10] The low unemployment numbers came more from the lower labor force participation rate than from more people finding jobs.[11]

Key Takeaway

Lower participation rates could affect long-term economic growth. However, the combination of low unemployment and reasonable wage growth are likely a positive scenario for the economy. Many people who want jobs have them, but inflation should remain under control.[12] 

As the bull market lumbers toward its ninth year, many reports continue to indicate a solid economy.[13] If the economic expansion continues through July 2019, it would be the longest in history (with records going back to the 1850s).[14] While that accomplishment would be noteworthy, our focus remains on current circumstances, and striving to find insight that affects your financial future. From trade to jobs to manufacturing and beyond, we have many details to watch on your behalf. 

ECONOMIC CALENDAR

  • Tuesday: JOLTS
  • Thursday: Consumer Price Index, Jobless Claims
  • Friday: 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.

The Federal Reserve System (also known as the Federal Reserve and, informally, as the Fed) is the central banking system of the United States. The Federal Reserve System is composed of 12 regional Reserve banks which supervise state member banks. The Federal Reserve System controls the Federal Funds Rate (aka Fed Funds Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.

Inflation is the rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market. 

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] www.reuters.com/article/us-usa-stocks/wall-st-rallies-as-inflation-fears-ebb-apple-hits-record-high-idUSKBN1I51CG
[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=%21DJI®ion=usa&culture=en-US
www.reuters.com/article/us-usa-stocks/wall-st-rallies-as-inflation-fears-ebb-apple-hits-record-high-idUSKBN1I51CG
[3] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
www.reuters.com/article/us-usa-stocks/wall-st-rallies-as-inflation-fears-ebb-apple-hits-record-high-idUSKBN1I51CG
[4] www.msci.com/end-of-day-data-search
[5] www.bloomberg.com/news/articles/2018-05-01/as-u-s-expansion-hits-endurance-milestone-here-s-what-s-next
[6] www.cnbc.com/2018/05/04/us-stock-futures-dow-earnings-trade-talks-and-nonfarms-on-the-agenda.html
[7] www.bloomberg.com/news/articles/2018-05-04/tepid-wages-participation-mute-celebration-on-u-s-jobless-rate
[8] www.usnews.com/news/articles/2018-05-04/unemployment-hits-lowest-level-since-2000
[9] www.cnbc.com/2018/05/04/us-stock-futures-dow-earnings-trade-talks-and-nonfarms-on-the-agenda.html
[10] www.bloomberg.com/news/articles/2018-05-04/tepid-wages-participation-mute-celebration-on-u-s-jobless-rate
[11] www.usnews.com/news/articles/2018-05-04/unemployment-hits-lowest-level-since-2000
[12] www.reuters.com/article/us-usa-stocks/wall-st-rallies-as-inflation-fears-ebb-apple-hits-record-high-idUSKBN1I51CG
[13] www.bloomberg.com/news/articles/2018-05-04/nine-days-one-signal-u-s-economy-is-doing-fine-if-not-great
[14] www.bloomberg.com/news/articles/2018-05-01/as-u-s-expansion-hits-endurance-milestone-here-s-what-s-next