Last week, all four of the indexes we discuss in these market updates saw their performance stumble. The S&P 500 lost 1.44%, the Dow was down 1.52%, the NASDAQ gave back 1.22%, and the MSCI EAFE declined 0.07%.
On Tuesday, March 21, the S&P 500 and Dow recorded 1% declines for the first time since Oct. 11, 2016. By Friday, the S&P had posted its worst week since the election. At the same time, 10-year Treasury yields fell and the dollar dropped for the second straight week.
As is typically the case, no simple answer can easily explain market behavior. Last week's healthcare headlines - and the House of Representatives' decision not to vote on the American Health Care Act of 2017 - may have caught the attention of many people on Wall Street. As a result, pundits will likely spend significant time debating what lies ahead for health care, tax reform, and other governmental policies. We again encourage you to look at the economic fundamentals rather than allowing news coverage to determine your financial confidence.
Recent Economic News
We did not receive a tremendous amount of new data between March 20 and 24, but three new reports did stand out: Durable Goods, New Single-Family Home Sales, and Existing Home Sales. Durable goods orders increased 1.7%.
Orders for durable goods (items expected to last) beat expectations in February and are up 5% since this time last year. While commercial aircraft orders accounted for a significant portion of the increase, data throughout the report may indicate that business investment and confidence is on the rise.
New single-family home sales increased 6.1%.
In February, sales of new single-family homes hit their second-fastest growth since 2008. Even as home prices and mortgage rates rise, demand for new homes has grown by 12.8% in the past 12 months.
Existing home sales dropped 3.7%.
Coming off of January, where we saw the fastest pace of existing home sales since 2007, the report missed expectations in February. Low inventory of available houses is pushing prices higher and may be keeping some potential buyers from moving forward. In the past year, median prices have risen 7.7%; meanwhile, sales are 5.4% higher.
This week, we will receive the Q4 GDP final reading, as well as insight into personal income, consumer sentiment, and consumer confidence. This and other forthcoming data provides the foundation necessary for clearly understanding the economic environment.
We understand how compelling the news and political conversations can be, and there is no denying that policies can affect the economy. However, we are here to help you gain the perspectives you need to know where you stand in your unique financial life - rather than what the headlines may urge you to believe.
Tuesday:strong> Consumer Confidence, International Trade in Goods
Wednesday: Pending Home Sales Index
Friday: Personal Income and Outlays, Consumer Sentiment
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices and Treasury.gov. 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.
These are the views of 4th River Financial Group, and not necessarily those of the named representative, and should not be construed as investment advice. Neither the named representative nor the Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor .for further information.
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 indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P US Investment Grade Corporate Bond Index contains US- and foreign issued investment grade corporate bonds denominated in US dollars. The SPUSCIG launched on April 9, 2013. All information for an index prior to its launch date is back teased, based on the methodology that was in effect on the launch date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back tested returns.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
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.
Google Finance is the source for any reference to the performance of an index between two specific periods.
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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