Markets were up on Friday, but domestic stocks lost ground for the week as political turmoil and potential trade wars weighed on investors' minds. The S&P 500 dropped 1.24%; the Dow gave back 1.54%; and the NASDAQ decreased 1.04%. International stocks in the MSCI EAFE barely avoided losses with a 0.13% gain.
1. Mixed Performance Results
Overall, we received a variety of mixed data last week:
- Housing starts missed expectations and fell 7%.
- Retail sales were lower than expected.
- Consumer sentiment hit its highest reading since 2004.
- Domestic factory production beat expectations.
Data reports were not the only detail worth noting last week. We also marked the 10-year anniversary of Bear Stearns' collapse.
2. A Look Back
For 85 years, Bear Stearns was a respected institution that became one of the world's largest investment banks. When the housing market crashed in 2007, the firm realized it had taken on far more risk than planned. As a result, the firm ran out of cash, and on March 16, 2008, JPMorgan bought the previously valuable company for only $2 a share. In retrospect, Bear Stearns' collapse was the first real glimpse of the pending Great Recession.
Less than a year later, markets hit bottom on March 9, 2009. In the years since, stocks have corrected multiple times, losing over 10%, but, they have never lost 20% to push into a bear market, meaning we're in the midst of the 2nd-longest bull market since World War II.
Time can make some memories fade, but we doubt that anyone who experienced the Great Recession forgets how challenging and scary it felt.
Here's what headlines were telling us:
Despite the market losses and economic turmoil, the Great Recession was also a powerful reminder of Warren Buffett's advice: "Be fearful when others are greedy and greedy when others are fearful."
While the markets seemed to be in a free-fall, allowing emotion to dictate investing choices was easy, but anyone who escaped the markets' bottom missed an incredible growth opportunity.
Nine years after the S&P 500 hit its low, the index was up 390% and was 122% higher than its record close before the Great Recession began. So, while the collapse was painful, stocks weathered the storm, sailing far beyond where they were before. The economy is also in a very different place than it was a decade ago.
Where We Are Now
- Job Growth: February was the 89th-straight month where the economy added jobs.
- Unemployment: The current unemployment rate remains at its lowest level in 17 years.
- Gross Domestic Product: The U.S. economy has expanded every year since 2010.
Of course, we recognize that the economy is not perfect and still has room to improve, but we also want to remind you of how far we've all come since the Great Recession first began. If you'd like to take a closer look at your own progress or plans for the future, we are always here to talk.
- Wednesday: FOMC Meeting Announcement, Existing Home Sales
- Thursday: Jobless Claims
- Friday: Durable Goods Orders, New Home Sales
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.
Gross Domestic Product (GDP) is a measure of output from U.S. factories and related consumption in the U.S. It does not include products made by U.S. companies in foreign markets.
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.
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