The Northern Star 06/21/18 Trade and Interest Rates
Message from Jon
Last week the indexes were kind of quiet early on while everyone awaited the FED meeting on interest rates and monetary policy. Coming as no surprise, the FED raised interest rates, resulting in a slight decline by the end of the day. Overall, we had a rather flat performance across the indexes for the week.
- S&P 500 began at 2780 and ended at 2779
- DOW began at 25,336 and ended at 25,090
- NASDAQ began at 7,647 and ended at 7,746
All in all, not much progress was made, but there certainly was a lot of fluctuation.
Just when you think the geopolitical tensions might recede a bit, the President shakes things up. First, he attended the G7 summit, leaving abruptly and then followed by meetings with the North Korean President in what is termed as the "Trump-Kim Summit".
Trump has also approved a 25% import tax on 50 Billion Dollars worth of Chinese Imports only to have China retaliate with a 25% import tax on 35 Billion Dollars worth of American Imports. This has influenced the markets Monday declining over 100 points on the DOW.
The mid-term indicator is demonstrating a weakening in the Foreign Equities market but a strengthening of the domestic markets. The StormGuard Algorithm is suggesting a strengthening in the overall market condition giving us reason to believe that although the geopolitical tensions have risen again, we are not seeing any evidence that we should be running for higher ground and bracing for impact.
Till we speak again, enjoy your HOT week!
Trade and Interest Rates
WEEKLY UPDATE - JUNE 18, 2018
Last week stocks showed mixed results as political headlines continued to dominate the news. The Dow lost 0.89% and the S&P 500 was almost flat with a 0.02% gain. The NASDAQ, on the other hand, reached a record high on Thursday and ended the week up 1.32%. Both the S&P 500 and NASDAQ experienced their 4th week of gains in a row.International stocks in the MSCI EAFE lost ground, posting a 0.52% decline.
Two Key Perspectives From Last Week
1. Trade tension continued. Spats with U.S. allies - including Canada - and ongoing threats of a trade war with China captured investors' attention last week. On Friday, equities briefly stumbled when the U.S. pledged new tariffs on Chinese goods, and China responded by promising the same level of tariffs on the U.S. A true trade war could slow global economic growth, but the current tariff tension may be little more than negotiation tactics.
2. Interest rates increased. On Wednesday, June 13, the Federal Reserve raised its benchmark interest rates for the 2nd time this year. Fed Chairman Powell said, "...the economy is doing very well. Most people who want to find jobs are finding them and unemployment and inflation are low." The Fed believes economic growth will continue at a faster rate than they last predicted. They also project that unemployment will fall to 3.6% by the end of 2018. The Fed may raise rates twice more this year.
The TakeawayGetting caught up in the news cycles and international headlines is easy, but they often provide little perspective on what may actually lie ahead for investors. Instead of trying to predict market performance, we encourage you to focus on the data.
This week, we'll gain new perspectives on the housing market, as well as employment. The insight will continue to help us build a picture of where the economy is today-and how to help our clients make the most of their opportunities.
Monday: Housing Market Index
Tuesday: Housing Starts
Wednesday: Existing Home Sales
Thursday: Jobless Claims
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
IRS Makes Inflation Adjustments for New Tax Law*
The Internal Revenue Service has made inflation adjustments for 2018 to accommodate changes in the tax code for the Tax Cuts and Jobs Act. The changes will apply to 2018 returns filed in 2019. The top items for 2018 returns include:
Tip adapted from IRS.gov
|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.
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.
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