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The Northern Star 10/08/18 Examining Economies


Message from Jon

A difference experience makes...

As I return to the office today (Thurs) from a series of meetings, I stare into a screen that demonstrates a 328 pt. loss on the DOW 1, a 175 pt. loss on the NASDAQ 3, and 37 pt. loss on the S&P 500 2 -all in the ranges of 1% and 2.5% down-and I am thinking to myself, I wonder how many clients are going to log in and "check their accounts" and how many are simply not.

Remember when you got your first new pair of jeans as a young adult and you were proud of them, right? They were all clean, neat, and have the crease down the leg. They maybe went with your favorite outfit or just plain felt good.Then, you stepped in a puddle and immediately wanted to search your new pants for any sign of damage!

After a while though, those new pants turned to old and you were no longer really concerned about the damage puddles can do. Experience teaches you a lot about things you go through, just like it teaches you a lot (or should) about investing. On days that the markets are rough or experiencing a correction/slide, the new account owner is inclined to log in and check their accounts, while the experienced one does not.

Experience teaches you that when, not if, you stumble into puddles or can't get out of the rain fast enough to avoid getting wet, it is not the end of the world. This too shall pass, and the sun will again shine, clothes can be washed and accounts, rebound.

Logging in on the same day each month will give you enough perspective without causing you emotional swings that end up in behaviors that you regret over time. Don't make the mistake of logging in too frequently-it doesn't serve you well emotionally, but it WILL cause you to second guess your choices, which is never a good idea in the end anyway!

Till we speak again, enjoy your week!



1: DJIA Chart 

2: S&P 500 Chart

3: NASDAQ Chart

Examining Economies


Although new data continued to show strength in the U.S. economy, markets stumbled across the globe last week.[1] The S&P 500 lost 0.98%, the Dow dropped 0.04%, and the NASDAQ declined 3.21%.[2]International stocks in the MSCI EAFE struggled, posting a 2.35% loss.[3]

While U.S. and international stocks followed similar paths last week, data is beginning to show that our economic outlooks may be very different for the moment.[4]

U.S. Strength in a Growing International Divide
The latest labor report helped underscore some of the differences between the U.S. economy and the rest of the world. While the data missed the mark for new jobs added, September marked the 96th-straight month of job growth - and the lowest unemployment level since 1969.[5] The report pushed interest rates higher, which contributed to last week's equity losses.[6]

However, when describing our economy, Federal Reserve Chair Jerome Powell said it is experiencing "a particularly bright moment."[7]  

Global Growth Adjustments
At the same time, the International Monetary Fund (IMF) indicated that it would decrease its global economic growth predictions. The IMF hasn't downgraded its forecasts since 2016. Currently, more risks are beginning to emerge - from trade tension to political challenges in Europe.[8] In particular, the rise in oil prices, the U.S dollar, and interest rates are hurting emerging economies.[9]

HSBC mirrored this divide, cutting its global economic outlook while upgrading U.S. numbers.[10]

A Look Ahead While Looking Back
As the labor market tightens, inflation could rise - bringing even more interest rate hikes from the Federal Reserve.[11] While rising rates bring their own set of risks, they are ultimately a sign that the economy is growing. On the other hand, when the Fed lowers rates, they do so because the economy is slowing.[12]

This week, we mark the 11th anniversary of the markets hitting their highest pre-recession point on October 9, 2007.[13] At that time, hopes that the Fed would lower rates again contributed to the new record highs.[14] In the ensuing months, the Dow lost more than half its value as the Great Recession began.[15]

While markets were down last week, they were still far ahead of their highs from 2007. The Dow closed at 14,164.43 on October 9, 2007 - and ended at 26,447.05 on October 5, 2018.[16]

Investors have experienced quite a ride in the past 11 years, but the market's long-term growth is undeniable. Risks are here, as they always are. But we are here to help you understand and navigate those risks, no matter what the markets bring.

Monday: U.S. Holiday: Columbus Day
Wednesday: PPI-FD
Thursday: CPI, Jobless Claims
Friday: Import and Export Prices, Consumer Sentiment


[1] www.reuters.com/article/us-global-markets/stocks-fall-globally-after-u-s-jobs-data-treasury-yields-rise-again-idUSKCN1MF04H 

[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US


[3] www.msci.com/end-of-day-data-search

[4] www.bloomberg.com/news/articles/2018-10-05/u-s-economy-isn-t-bright-enough-to-offset-global-growth-slowing?srnd=markets-vp

[5] www.cnbc.com/2018/10/05/us-markets-jobs-report-and-rates-in-focus.html

 [6] www.cnbc.com/2018/10/05/us-markets-jobs-report-and-rates-in-focus.html

[7] www.bloomberg.com/news/articles/2018-10-05/u-s-economy-isn-t-bright-enough-to-offset-global-growth-slowing?srnd=markets-vp

[8] www.bloomberg.com/news/articles/2018-10-05/u-s-economy-isn-t-bright-enough-to-offset-global-growth-slowing?srnd=markets-vp

[9] www.reuters.com/article/us-global-markets/stocks-fall-globally-after-u-s-jobs-data-treasury-yields-rise-again-idUSKCN1MF04H

[10] www.bloomberg.com/news/articles/2018-10-05/u-s-economy-isn-t-bright-enough-to-offset-global-growth-slowing?srnd=markets-vp

[11] www.bloomberg.com/news/articles/2018-10-05/u-s-economy-isn-t-bright-enough-to-offset-global-growth-slowing?srnd=markets-vp

[12] www.investopedia.com/investing/how-interest-rates-affect-stock-market/

[13] www.thebalance.com/stock-market-crash-of-2008-3305535

[14] money.cnn.com/2007/10/09/markets/markets_0500/index.htm?postversion=2007100917

[15] www.thebalance.com/stock-market-crash-of-2008-3305535

[16] www.thebalance.com/stock-market-crash-of-2008-3305535
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