Before we begin our usual weekly commentary, we wanted to take a moment to honor the victims of Sunday's terrible attack in Las Vegas. Though details are still scarce, it is the most devastating mass shooting in U.S. history. Our thoughts are with the victims, their families, and with the community that now must cope with the aftermath of the tragedy. As we look for answers, let's also remember to be grateful for the ones we love.
Last week's final performance of Q3 saw the S&P 500 hit a new high and finish up 0.68%. Meanwhile, the Nasdaq beat previous records with a 1.07% gain, and the Dow notched a 0.25% increase to come within 0.1% of its all-time high. International markets, however, experienced a slight drop, as the MSCI EAFE fell 0.19% for the week.
As the country continues its recovery from Hurricanes Harvey, Irma, and Maria, the economy keeps revealing positive strides. A few specific performance factors rounded out the week:
- Small Cap Gains Post Strong Returns
Small cap gains hit record highs last week. Some analysts think the gain is partially a result of President Trump's proposed tax code changes which offers tax cuts to corporations and individuals. Because small cap companies often have limited international resources, they often benefit the most from tax cuts. That said, rising interest rates and a higher dollar are also factors to take into account.
- Dollar Is On the Rise
The dollar index fell on Friday, but the buck still points towards weekly and monthly highs. Despite dipping after news of slow consumer spending, the greenback responded positively to increases in consumer sentiment and the Chicago Purchasing Managers Index. The Chicago Purchasing Managers Index matters to investors because it measures manufacturing and non-manufacturing activity in the greater Chicagoland area. These numbers tend to closely mirror the rest of the country.
- Corporate Earnings Hit New Highs
Corporate earnings are a signifier of how well corporate stocks perform. Last week, earnings posted back-to-back double-digit gains for the first time since 2011. This performance helped push markets beyond geopolitical affairs and concerns from the recent devastation caused by hurricanes.
What Is Ahead?
Markets will continue to watch out for Harvey, Irma, and Maria's influence on this week's key economic reports. Analysts expect strong data from manufacturing to vehicle sales, though damages to ports may affect international trade.
Further, we are watching the Fed's decisions to shrink its balance sheet and raise interest rates. We will also continue following how President Trump's recent announcement to possibly replace Fed Chair Janet Yellen (whose tenure ends in February) affects the markets.
As always, we continue our focus on helping you meet your long-term goals. If you have any questions as to how last week's news may affect your portfolio, let us know. We are here to answer questions and help your investment process run smoothly.
Monday: PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending
Tuesday: Motor Vehicle Sales
Wednesday: ADP Employment Report, ISM Non-Mfg Index
Thursday: Factory orders
Friday: Employment Situation
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 S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
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.
Small cap is a term used to classify companies with a relatively small market capitalization. The definition of small cap can vary, but it is generally a company with a market capitalization of between $300 million and $2 billion. The prices of small cap stocks are generally more volatile than large cap stocks.
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.
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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.
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