Correction

With today’s ride, the S&P 500 has officially “corrected,” down 10% from its January record-high.

And yet we beat the drum.

Firstly, US trade tactics seem to be following a pattern. Big news-making announcements followed by comparatively narrow/weak implementation.

Secondly, the fundamentals – especially in the US - remain strong. (Please see prior notes for details. I feel like we go over this point ad nauseam.)

Thirdly, history shows end-of cycle markets are volatile. Yes, we are in the final innings of this expansion ergo more volatility.

In early May, the Trump administration will decide whether to continue to waive sanctions against Iran - another volatility flashpoint. Buckle your seat belt.

Weekly Update through March 29, 2018 The S&P 500 gained 2.06%, even as the Dow Jones added 2.52%, the Russell 2000 advanced 1.35% and the Nasdaq added 1.03%.

As for US bonds, they gained 52bps.                         

Globally, the MSCI World Index gained 1.53% and the Barclays Global Aggregate Bond Index lost -9bps.

The Euro Stoxx 50 added 1.95% in local-currency (Euro) and 1.36% USD. Meanwhile, the Topix gained 3.18% in local-currency (Yen) and 1.83% in USD.

Month-end Update through end-March 2018 In March, the S&P 500 lost -2.54%, the Dow Jones lost -3.59%, the Russell 2000 gained 1.29% and the Nasdaq lost -2.79%.

As for US bonds, they gained 64bps.

Globally, the MSCI World Index lost -2.18% and the Barclays Global Aggregate Bond Index gained 1.07%. 

In March, the Euro Stoxx 50 lost -2.15% in local-currency (Euro) and -1.49% in USD. Meanwhile, the Topix lost -2.85% in local-currency (Yen) and -2.57% in USD.

Consumer where art thou?

The labor market is strong. Wages are - slowly - rising. However, so far in 2018, sales have been relatively tepid.

For example, in February, headline retail sales dipped -0.1% and auto sales were also down.

What gives?

Consumer spending is the major contributor to GDP and accounts for about 70% of all US economic growth. Without it, GDP can’t accelerate.

Some investors are claiming this is a warning sign recession is imminent. We don’t agree.

Firstly, what these early ’18 figures belie is the strong 12-month data. Overall retail sales are up more than 4% from a year ago. Yes, the February data shows decreases, but these are off from super solid 12-month figures.

Secondly, strong employment growth, stable disposable incomes, all-time high household net worth and high levels of consumer confidence bode well for increased spending.

Weekly Update through March 16, 2018 The S&P 500 lost -1.20%, even as the Dow Jones declined -1.51%, the Russell 2000 lost -65bps and the Nasdaq lost -1.02%.

As for US bonds, they gained 22bps.     

Globally, the MSCI World Index lost -65bps and the Barclays Global Aggregate Bond Index gained 29bps.

The Euro Stoxx 50 added 49bps in local-currency (Euro) and 26bps in USD.  Meanwhile, the Topix gained 1.23% in local-currency (Yen) and gained 1.93% in USD.

Tit-for-tat

Trade tensions – rather than a trade war – are likely to persist.

However, the end of the equity bull market will probably be due to an overheated economy and rising fiscal imbalances - not trade protectionism.

Both the backdrops for US and global growth remain solid - for now. Our current outlook is still bullish. That said, data suggests we are likely near the final innings of the current expansion.

Weekly Update through March 9, 2018 The S&P 500 gained 3.59%, even as the Dow Jones increased 3.34%, the Russell 2000 added 4.20% and the Nasdaq also added 4.20%.

As for US bonds, they declined -12bps.                         

Globally, the MSCI World Index was up 2.91% and the Barclays Global Aggregate Bond Index lost -19bps.

The Euro Stoxx 50 added 2.90% in local-currency (Euro) and 2.95% in USD.  Meanwhile, the Topix gained 42bps in local-currency (Yen) and lost -75bps in USD.

Nothingburger

Despite last month’s dreary returns, stronger nominal growth and a patient Fed are most likely a positive combo for equities.

First quarter 2018 GDP is anticipated to come in at 2.50%, the same pace as for 2017.

However, economists are estimating a bit higher 2.8% GDP growth by year-end.

This compares with much slower growth of just 1.8% by end-2016.

That said, as we've talked over, it could be well argued the US is in the late innings of this expansion. Despite our currently positive outlook - as February returns attest - we’ve entered a more volatile phase.

Weekly Update through March 2, 2018 The S&P 500 lost -1.98%, even as the Dow Jones lost -2.97%, the Russell 2000 lost -1.00% and the Nasdaq lost -1.05%.

As for US bonds, they gained 2bps.   

Globally, the MSCI World Index lost -2.23% and the Barclays Global Aggregate Bond Index gained 17bps.

The Euro Stoxx 50 lost -3.39% in local-currency (Euro) and lost -3.34% in USD. Meanwhile, the Topix lost -2.94% in local-currency (Yen) and -2.04% in USD.

Month-end Update through end-February 2018 In February, the S&P 500 lost -3.69%, the Dow Jones lost -3.96%, the Russell 2000 lost -3.86 and the Nasdaq lost (just) -1.73%.

Meanwhile US bonds lost -95bps.

Globally, the MSCI World Index lost -4.09% and the Barclays Global Aggregate Bond Index lost -89bps. 

In February, the Euro Stoxx 50 lost -4.57% in local-currency (Euro) and -6.16% in USD. The Topix lost -3.70% in local-currency (Yen) and -1.33% in USD.

Publilius who?

Anyone Can Hold the Helm When the Sea is Calm

So said Publilius Syrus, the Syrian slave turned famed sententiae writer who lived from 85-43BE.

I came across this quote doing some research on Syria. No, you’re right, it’s not a good investment climate.*

Anyway, perhaps with a little sea sickness still in the craw, it’s a good time to consider why we might bother with human investment advisors.

• We can help you avoid emotional mistakes,

• We can listen and give constructive advice, and  

• We can help you plan and secure your future.

For many of us the last few weeks in the markets have reminded us why AI can help the human advisors - but probably won't replace us. Well, those of us who are human ;-)

Weekly Update through February 16, 2018 The S&P 500 gained 4.37%, even as the Dow Jones added 4.36%, the Russell 2000 gained 4.48% and the Nasdaq gained 5.36%.

As for US bonds, they declined -23bps.                         

Globally, the MSCI World Index gained 4.33% and the Barclays Global Aggregate Bond Index added 1.01%.

The Euro Stoxx 50 gained 3.06% in local-currency (Euro) and 4.97% in USD.  Meanwhile, the Topix gained 31bps in local-currency (Yen) and 2.55% in USD.

* I was just trying to understand what in God's name is going on in Syria. Why can't non-combatants, such as children, be allowed to leave war zones? Is that just so 20th century?