Markets "In a Nutshell" for March 21, 2018Mar 21, 2018
Investment Week at a Glance
Stocks finished mostly lower for the week. The Dow Jones Industrial Average was down 1.54%, the S&P 500 fell 1.24%, the New York Stock Exchange Composite (2,000 stocks) was down 1.04% and the average investors index (Value Line Index) was down 0.76%. Foreign stocks (DJ Global ex U.S.) were up 0.19%. Bond prices were higher for the week, pushing the yield on the 10-year U.S. Treasury down 5 basis point to finish the week at 2.84%. (Data sources: Barron’s Financial, Wall Street Journal)
A Soft Week for Stocks
U.S. stocks were down for the week due in part to concerns about the potential for a trade war between the U.S. and other nations. Interest-rate sensitive sectors such as utilities and REITs were the best performers as interest rates moderated. In contrast, materials and industrials companies underperformed on growth concerns.
Economic data in the U.S. was mostly positive last week. Employment data—including changes in nonfarm payrolls and initial jobless claims—came in better than expected, as did industrial production and the University of Michigan’s consumer sentiment index. That said, retail sales and housing starts disappointed.
Markets were generally calm last week from a volatility perspective. Despite political uncertainty involving the Trump administration, the CBOE Volatility Index (VIX) remained at around 15—somewhat below its longer-term average. This suggests that the market continues to expect more volatility than we saw last year, but nothing too drastic.
International economic data was uneventful, overall. For example, France, Germany and Japan all saw inflation results that were in-line with expectations.
Asian markets outperformed as a proposed meeting between the U.S. and North Korea eased concerns about political tensions in the region. But emerging markets struggled on concerns over moderating economic growth.
Inflation Remains In Line with Expectations
U.S. Treasury yields bounced around last week, but ultimately ended near where they started. Global stocks and bonds posted roughly the same returns, with stocks just slightly outperforming bonds for the week. The one-year return spread between stocks and bonds remains at more than 18%, with global stocks up around 2% year to date and the broad-based bond market down around 2% for the year so far.
Inflation in February, as measured by the consumer price index, came in at 1.8% (excluding the volatile food and energy sectors) on a year-over-year basis. That was in-line with expectations, helping to calm investors’ fears of inflation overheating. Meanwhile, the producer price index (ex-food and energy) came in at 2.7% year-over-year—also matching expectations. Investors will be closely following the Fed’s meeting this week to see if the Fed raises a key short-term interest rate as expected.
For the individual who owns both a 401(k) and an IRA, when it comes time to take Required Minimum Distributions, which is correct:
a) You must take a distribution from each account separately
b) You can add together the required distribution and take it from the IRA
c) You can add together the required distribution and take it from the 401(k)
d) You can add together the required distribution and take it from either
Have a good week!
Answer to quiz:
a) You must take a distribution from each account separately. Traditional IRA required distributions can be added together and taken from any one or several traditional IRAs. The same isn’t true of employer plans. Those required distributions must be calculated separately for each employer plan and taken from each plan individually.