2018 Market Letter Q2
There's No Place Like Home
The S&P 500 put up strong gains into the holiday and finished up 2 percent for the week. This quarter has been marked by the return of volatility with the market posting daily gains or losses in excess of 1 percent on 22 different occasions. To put this in perspective, there were just eight of these instances in all of 2017.
Will Facebook Find Some Friends?
In the face of unquestionably strong economic data, global equities declined nearly 5 percent on the week with the S&P 500 falling close to 6 percent. The sharp selloff can be attributed to a confluence of factors, none of which will have any impact on near-term earnings momentum.
Cole and Fovinci Quoted in The Bend Bulletin
Investment advisers offer positive outlook to Central Oregon clients
A Portland-based investment manager reassured high-net-worth clients in Bend on Tuesday evening that good times will continue this year, but the audience met that outlook with skepticism and questions.
50 Shades of Beige
U.S. factory production exceeded growth expectations and the University of Michigan consumer confidence survey came in at a 14-year high, helping U.S. stocks to break out of their four-day slump (triggered by tariffs and White House turmoil). However, it won’t be enough to turn in positive numbers for the week.
There's a New Tariff in Town
Strong economic data led the market to big gains this week, despite President Trump’s tariff announcement. The S&P 500 was up over 3 percent, while bond yields were quiet on the week. Volatility has indeed returned to the market with three-out-of-five days experiencing more-than-1-percent swings in value.
2017 Annual Report
Fed Chair Powell - Yellen 2.0
For the week the equity markets were lower by more than three percent as investors reacted to the news that President Trump intends to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports fueling fear of protectionist economic policy.
Piling It On
Global equity markets were up slightly this week after the U.S. experienced its greatest one-week gain since 2011 in the previous week. Interest rates took a pause in their upward move with the 10-Year Treasury flat on the week at 2.87 percent.
Back In Business
Following the stock market’s first correction since the Chinese growth scare two years ago, blue-chip stocks have rebounded furiously, producing the best week of returns since December of 2011. Investors spooked by the rapid descent of stock prices earlier this month are now scrambling to get back in.
Fire and Fury
The S&P 500 officially entered correction mode this week, pulling back approximately 10 percent from the January highs.
Capital Markets Update, February 5, 2018: Correction Versus a Bear Market
NOTE: This communication was originally sent to clients on February 5, 2018.
As we entered 2018 our expectations were for the market to be positive for a 10th consecutive year, but we felt that volatility would return. In the past week, market volatility has returned in a big way. Since January 26, the S&P 500 is down 7.5 percent. This represents the biggest selloff since the China growth scare of January 2016. This correction takes the S&P 500 to negative-1 percent for the year.
Market corrections within bull markets are a common occurrence, yet never pleasant. In our Investment Outlook this year we highlight the difference between a market correction and a bear market. The chart below shows that when a correction occurs in a growing economy the average market selloff is about 13 percent, and it takes about six months to return to even. When a market correction is associated with a recession, the market drops an average of 34 percent and it can take up to three years to get back to even. We believe this is a correction, and not a bear market.
The irony of this selloff is there just may be too much good economic news. The market is selling off over the concern that growth and inflation will accelerate, causing the Fed and possibly other central banks around the world to tighten more than is expected. The market is undergoing an adjustment of expectations around rate hikes and interest rates. Our view is that interest rates will go up this year, but not enough to slow global economic growth.
Recent volatility is not causing us to change our stance on asset allocation. We remain neutral in our clients’ target stock-to-bond ratio. If there is cash in a portfolio that is waiting to be invested, we are using this pullback as an opportunity to deploy that cash. We urge clients to remain patient in the face of market volatility. While we don’t know how long this selloff will last, we do know that selling into weakness is rarely, if ever, a good decision. We continue to believe the S&P 500 will be higher at the end of the year, but volatility has returned.
If you have any questions or concerns, please contact your portfolio manager.
January Is the Market's Groundhog?
This week we experienced something we haven’t in some time: a down week. Stocks struggled to a close, down 3.8 percent with no help from blue-chip names. Alphabet (GOOGL) and Apple reports weren’t favored by Wall Street, driving the stocks down 5.2 and 4.3 percent, respectively.
Give Me One Good Reason
Equity markets finished the week up by 1.5 percent, and now are up almost 7 percent for the year. This is the 4th best start to the year for the S&P 500. The U.S. Treasury 10-year bond yield continued its march higher by 6 basis points, finishing at 2.65 percent.
Take the Money and Run
Global equity markets continued their hot start to the year with the S&P gaining 0.6 percent, Europe 1.25 percent and emerging markets up 1.65 percent. On the other hand, bonds declined slightly as interest rates moved higher with the 10-year U.S. Treasury yield finishing the week at 2.63 percent, its highest level since last spring.
Q1 2018 Investment Strategy Video
In the video, George Hosfield, CFA, principal and chief investment officer, explains why we believe this ninth year of economic expansion and related bull market for equities will extend into 2018.
Jones Quoted by Reuters
IPhone Addiction May be a Virtue, not a Vice for Investors
Apple investors are shrugging off concerns raised by two shareholders about kids getting hooked on iPhones, saying that for now a little addiction might not be a bad thing for profits.
U.S. Core Inflation Drifts Slightly Higher
U.S. stocks continued their upward climb this week, with the Dow Jones Industrial Index trading above 25,775 and the S&P 500 rising approximately 1.5 percent for the week. The U.S. dollar traded off relative to the euro, which surged to a three-year high of $1.21.
Highlights of the 2017 Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act enacted on December 22, may significantly change tax planning for many of our clients. As in past years, we are providing you with a link to the College of Financial Planning’s® Guide to Annual Limits, which is a reference for 2018 for a variety of tax and other wealth planning figures.
Off to the Races
Stocks picked up where they left off in 2017, rising across market caps and geographies for each of the first four trading days of the new year. The Dow Jones Industrial Average eclipsed the 25,000 mark this week and it took just 23 trading days to gain its latest 1,000 points—the fastest such gain in index history.