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MARKET HIGHLIGHTS: Q1 2018
2018 hasn’t been an easy ride so far. Market volatility began to rear its ugly head almost from the start, and then stocks went on sale again when the S&P 500 dropped 5.9% over five days—its worst week since January 2016. On the heels of a particularly celebratory 2017 (at least from an investment perspective), the stock market proved it is anything but predictable. For the quarter, the S&P index was down -1.22% and the Dow Jones was down -2.49%. And though the tech-heavy NASDAQ was up slightly at +2.32%, it was down for the month by -2.88% after gaining an impressive +7.4% in January. Market volatility is back, and it’s likely to be with us for a while.
Why the change in sentiment? Investors seem to be falling into a familiar pattern: the Trump Administration announces tariffs—this time on Chinese imports— but is not specific on the details. Wary of retaliation against American products sold abroad, traders put a lower value on the large, multinational companies that make up most of the major indexes.
The last time this happened, the tariffs involved steel and aluminum. This time, the U.S. announced plans to impose tariffs on about $50 Billion worth of Chinese goods, which prompted China to retaliate, slapping its own tariffs on $3 Billion worth of US exports, including fruit, pork, and steel pipes. The threats from both countries have fueled fears of a global trade war.
Meanwhile, in the wake of the Cambridge Analytica scandal, Facebook shares fell almost 10%, from 176.83 down to 159.39. This took the social media giant down from the 5th largest capitalization company in the S&P 500 index to the 6th (behind Berkshire Hathaway) and dragged the index down even further. And yet there is some good news. What’s remarkable about the selloff over things that may or may not happen is that it came amid some very good news about the U.S. economy. Durable-goods orders jumped 3.1% in February, sales of newly-constructed homes were solid, and Atlanta Fed president Raphael Bostic announced that there were “upside risks” in GDP and employment. Translated, that means that the economy is looking too good to keep interest rates as low as they have been—which means this is a curious time to be selling out and heading for the investment sidelines.
If none of that helps you feel less rattled, I recommend re-reading my blog Wall Street has gone wild! for some additional perspective. And if you’re still not at peace with the market and your place in it, give us a call. As always, we’re here to help.