As the first six months of the year comes to an end, stocks globally have returned excellent numbers. As of Thursday’s market close, the S&P 500 is up a little more than 16.5%, while emerging markets are up 9.2% and Eurozone equities and Japanese stocks have increased 15% and 9.8% respectively.
The flight to safety continues in the bond market, pushing the U.S. 10 Year Government Bond to 2017 levels. Normally a bond rally like the one we have seen leads to a sell off in equities. However, that is not what we have seen; in fact, the S&P 500 has increased 2.17% in the last week.
While most people are fretting about market volatility and the China trade war, at Surevest, we are focusing on the things we can control and the issues that impact our client’s long-term wealth. We are just one tweet away from a 10% rally or a 10% decline in the S&P 500. Either way, looking out 5-10 years, that move will be meaningless to your ability to tap into your portfolio as a source of income to fund your lifestyle.
As the trade war with China heated up this week, investors rushed to safety with the 10-Year U.S treasury hitting its lowest level since Nov 2017 with a yield of 2.3% yesterday.
Our view remains that a trade deal eventually gets done, but not as fast as most would like. The potential for a 25% Tarif on the remaining $300 billion of Chinese imports has increased and ultimately could result in about a 0.5 to 1% hit to U.S. GDP; potentially twice that to the Chinese economy.
The trade war has been dominating headlines this week, so we wanted to share a few thoughts and insights. First, a little background… The idea behind Free Trade is we should all specialize in whatever we can do better and cheaper than anyone else and then trade to get the things others produce more efficiently.
Just last week, Wall Street was celebrating a new milestone of fresh market highs, but the high quickly came to an end following a weekend tweet. The possibility of a trade war has been on investor’s radar for about a year, but the market has mostly been discounting the risk. The consensus is that the current administration and China have been playing hard ball, but that they would reach an agreement.
It was an eventful week on Wall Street with new records set as the S&P 500 topped its previous September highs. The major index closed at 2945 for the first time in history this last Tuesday. Among the reasons for the optimism is a better than expected earnings season so far.
With the NFL draft upon us, I thought it appropriate to write this quick note to the NFL hopefuls and draft prospects who eagerly wait to hear their name and have a chance to play on Sundays. For most of you young men, the journey has been a long one. You have been involved with football since you were a kid, endured grueling training and practices at both the high school and college levels and now it is time to reap the fruits of your labor. More appropriately to get a taste of the fame, financial security and lifestyle afforded to those who play at a high level in the League.
It’s been an uneventful week on Wall Street, with the S&P 500 trading flat through Thursday’s market close. On the fixed income side, the U.S. 10-Year Treasury is trading just below a 2.5% yield.
It was not too long ago that the markets were talking about rising yields and the competition bonds would be for stocks. It was not too long ago that the markets were talking about rising yields and the competition bonds would be for stocks. While yields were on the rise, the narrative was subjectively doubtfully on the outlook of investors taking on equity risk for only an incrementally higher expected return.
What a way to start the new year; the major world equity markets finished the first three months with strong returns. The tech heavy NASDAQ Composite Index led the way with a return of 16.49% for Q1 2019, followed by the S&P 500 at 13.07% and the Dow Jones Industrial Average came in with a gain of 11.15%. The rest of the world was not far behind, the MSCI All World Index ex US had a positive return of just over 9.5% and the MSCI Emerging Markets Index had a respectable 9.54% increase.