Last week, rising tension between North Korea and the U.S. rattled the world's markets. As the two countries traded tough words, concerns escalated and markets reacted emotionally to the news.[1]Though stress is building internationally, we remain committed to focusing on the market fundamentals that drive long-term value.

Amidst the pressure last week, volatility returned to markets - and all three major U.S. market indexes turned south.[3] The Dow dropped 1.06%, the S&P 500 fell 1.43%, and the NASDAQ declined 1.50%.[4] Global markets also reacted as the MSCI EAFE lost 1.59% for the week.[5]

Though international developments dominated headlines, economic news important to markets and investors continued to roll out. The data reflects a solid economy, but some possible headwinds are on the horizon. Here are the highlights:

  • Impressive Corporate Earnings: Q2 corporate earnings reports both domestically and internationally were impressive. Reported corporate earnings in the U.S. increased an average of over 10% for the second quarter in a row - their first time doing so since 2011.[6]
  • Low Inflation: The consumer price index, which measures changes to the average price of specific goods and services, rose only 0.1% in July.[7]Expectations for a 0.2% increase failed to materialize as housing and travel costs, wireless services, and auto sales all slumped in July.[8] At 1.7%, year-over-year inflation remains below the Federal Reserve's targeted 2% growth rate. Continued low inflation may cause the Fed to rethink its plans to raise interest rates.[9]
  • Rising Demand for Labor: Labor markets continue to be a key economic driver as evidenced by sharply rising job openings. June's job openings jumped to 6.2 million from 5.7 million in May.[10] Year-over-year, job openings climbed an impressive 11.3%.[11] Moreover, jobless claims remain at historic lows.[12]
  • High U.S. Household Debt: The current outstanding consumer debt of $12.7 trillion is now higher than the previous record reached in 2008. This debt load could wind up being a drag on consumer spending and the economy as a whole.[13]

What Is Ahead

Tense geopolitical headlines may continue, but there will be plenty of market news, too. Retail, manufacturing, and housing data will come out this week, and Friday's August consumer sentiment numbers will be of interest.[14] Though the markets may move with emotions, economic fundamentals should continue to be the base for long-term value. 

No matter what questions you may have, we always welcome you to reach out and contact us. We are here to help.

ECONOMIC CALENDAR

  • Tuesday: Retail Sales, Import and Export Prices, Housing Market Index, Business Inventories
  • Wednesday: Housing Starts 
  • Thursday: Jobless Claims,Industrial Production
  • 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 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.

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 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] https://www.cnbc.com/2017/08/11/stocks-rise-for-the-first-time-4-days-after-tame-inflation-data.html

[2] https://www.cnbc.com/2017/08/09/as-north-korean-tensions-simmer-heres-how-stocks-reacted-to-past-crises.html?source=newsletter%7Ceveningbrief

[3] https://www.cnbc.com/2017/08/11/stocks-rise-for-the-first-time-4-days-after-tame-inflation-data.html

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

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

[5]  https://www.msci.com/end-of-day-data-search

[6] https://www.cnbc.com/2017/08/11/stocks-rise-for-the-first-time-4-days-after-tame-inflation-data.html

[7] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477397&cust=wsj-us&wiconly=1&lid=0#top

[8] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477397&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[9] https://www.cnbc.com/2017/08/11/markets-to-fed-theres-little-chance-of-another-rate-hike-this-year.html

[10] http://wsj-us.econoday.com/byshoweventfull.asp?fid=478572&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[11] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=482600&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[12] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477458&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[13] https://www.bloomberg.com/news/articles/2017-08-10/in-debt-we-trust-for-u-s-consumers-with-12-7-trillion-burden

[14] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=482600&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top