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    Markets "In a Nutshell" for April 25, 2018

    Apr 25, 2018

    Investment Week at a Glance

    Stocks finished higher for the week. The Dow Jones Industrial Average was up 0.42%, the S&P 500 rose 0.52%, the New York Stock Exchange Composite (2,000 stocks) was up 0.49% and the average investors index (Value Line Index) was up 0.82%.  Foreign stocks (DJ Global ex U.S.) were up 0.26%.  Bond prices were lower for the week, pushing the yield on the 10-year U.S. Treasury up 13 basis point to finish the week at 2.96%.  (Data sources: Barron’s Financial, Wall Street Journal)


    Financials Shine        

    First-quarter earnings season got underway last week, creating significant separation between various sectors of the U.S. equity market based on reported financial results. While stocks were generally flat overall, the energy and consumer discretionary sectors posted strong gains. In contrast, consumer staples and technology were down for the week.

    The financial sector led the U.S. equity market, benefiting from rising interest rates that can help boost financials’ profits. Industrials also outperformed after reporting strong first-quarter earnings. However, consumer staples was the worst performing U.S. market sector due to fears of slowing growth and deteriorating profitability resulting from input cost inflation. Real estate also suffered as interest rates rose.

    Economic data out of the U.S. last week was upbeat: Housing starts, retail sales and industrial production all came in ahead of expectations. One disappointment was initial jobless claims, which were higher than anticipated.

    In contrast, overseas economic data was generally disappointing. Germany’s ZEW survey (a measure of economic expectations), Russian industrial production and European CPI (inflation) failed to meet expectations.

    Internationally, European equities outperformed following strong earnings reports from several economically sensitive industrial companies. Emerging markets underperformed as global political and economic policy uncertainty prompted investors to reduce their risk.


    Bond Prices Fall

    Bond yields rose across the yield curve last week, causing bond prices to fall. Global stocks outperformed broad-based fixed-income once again, bringing the return spread between the two asset classes over the past 12 months to 18% in favor of equities.

    Bonds suffered mainly because rising commodity prices put upward pressure on inflation and inflation expectations. Recently, market expectations for future long-term inflation have risen by nearly 15 basis points, to around 2.5%.

    In the yield space, longer-duration bonds were hurt worst (as rising yields have a bigger impact on long bonds). Longer-duration Treasuries and corporates were down more than 1% and 2%, respectively, for the week. REITs also followed bonds lower. However, master limited partnerships were buoyed by rising oil prices and ended the week up more than 3% while global infrastructure was up slightly.



    If a retirement plan owner passes away at age 90 and hasn’t taken the RMD in the year of death, who takes his distribution?

    a)   Since the account owner died before the required distribution, there is none for the year.

    b)   It must be distributed under their Social Security number and included on their final income-tax return.

    c)   Since they had a required distribution, it must be distributed to his estate.

    d)  The plan beneficiary(ies) is responsible for taking any remaining, that is, undistributed, RMD for the year of death, by Dec. 31 of the year of death.


    Have a good week!





    Answer to quiz:

    d)   Any required distribution not taken by a deceased retirement account owner in the year of death must be distributed to the beneficiary.  It will go to the estate only if the estate is the beneficiary. If the distribution isn’t taken, the beneficiary is subject to a 50% penalty on the amount not taken.