The Northern Star 3/19/18: A Look Back
Message from Jon
With the recent (continued?) turmoil in our nation's capital, the markets are beginning to show signs of becoming weary that our president is likely and able to establish and keep key positions filled in his White House.
This alone has set the Geopolitical Risk Index to rise higher than it has since the invasion of Iraq, nearly 15 years ago, according to MarketWatch's Mark Decambre. Since 2017, I have changed my attitude to the catalyst of our next bear market crash from a monetary policy to a geopolitical one. And things seem to be aligning that way.
This is in no way a suggestion that you should change course and run for cover. It is but one set of information meant to help the sudden increase in market volatility and heartburn felt by investors. Do not let the 2017 hangover cause you to make any unwarranted changes to portfolios that you will later come to regret.
Till we speak again...Go Boilers! Beat Texas Tech!
|A Look Back|
|WEEKLY UPDATE - MARCH 19, 2018|
Markets were up on Friday, but domestic stocks lost ground for the week as political turmoil and potential trade wars weighed on investors' minds. The S&P 500 dropped 1.24%, the Dow gave back 1.54%, and the NASDAQ decreased 1.04%. International stocks in the MSCI EAFE barely avoided losses with a 0.13% gain.
1. Mixed Performance Results
Overall, we received a variety of mixed data last week:
Housing starts missed expectations and fell 7%.
Retail sales were lower than expected.
Consumer sentiment hit its highest reading since 2004.
Domestic factory production beat expectations.
But data reports were not the only detail worth noting last week. We also marked the 10-year anniversary of Bear Stearns' collapse.
2. A Look Back
For 85 years, Bear Stearns was a respected institution that became one of the world's largest investment banks. When the housing market crashed in 2007, the firm realized it had taken on far more risk than planned. As a result, the firm ran out of cash, and on March 16, 2008, JPMorgan bought the previously valuable company for only $2 a share. In retrospect, Bear Stearns' collapse was the first real glimpse of the pending Great Recession.
Less than a year later, markets hit bottom on March 9, 2009. In the years since, stocks have corrected multiple times, losing over 10%. But, they have never lost 20% to push into a bear market - meaning we're in the midst of the 2nd-longest bull market since World War II.
Time can make some memories fade, but we doubt that anyone who experienced the Great Recession forgets how challenging and scary it felt.
Here's what headlines were telling us:
Despite the market losses and economic turmoil, the Great Recession was also a powerful reminder of Warren Buffett's advice: "Be fearful when others are greedy and greedy when others are fearful."
While the markets seemed to be in a free-fall, allowing emotion to dictate investing choices was easy. But anyone who escaped the markets' bottom missed an incredible growth opportunity.
Nine years after the S&P 500 hit its low, the index was up 390% - and was 122% higher than its record close before the Great Recession began. So, while the collapse was painful, stocks weathered the storm, sailing far beyond where they were before. The economy is also in a very different place than it was a decade ago.
Where We Are Now
Job Growth: February was the 89th-straight month where the economy added jobs.
Unemployment: The current unemployment rate remains at its lowest level in 17 years.
Gross Domestic Product: The U.S. economy has expanded every year since 2010.
Of course, we recognize that the economy is not perfect and still has room to improve. But, we also want to remind you of how far we've all come since the Great Recession first began. If you'd like to take a closer look at your own progress or plans for the future, we are always here to talk.
Wednesday: FOMC Meeting Announcement, Existing Home Sales
Thursday: Jobless Claims
Friday: Durable Goods Orders, New Home Sales
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.
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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.
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