Markets “In a Nutshell” for June 3, 2019

Investment Week at a Glance

Stocks finished down for the week.  The Dow Jones Industrial Average was down 3.01%, the S&P 500 fell 2.62 %, the New York Stock Exchange Composite (2,000 stocks) fell 2.52% and the average investors index (Value Line Index) was down 3.27%.  Foreign stocks (DJ Global ex U.S.) were up 0.92%.  Bond prices were up for the week, pushing the yield on the 10-year U.S. Treasury down 19 basis points to finish the week at 2.14%.  (Data source: Wall Street Journal)

Markets Remain Cautious

The S&P 500 remains just below the level it was at the beginning of 2018, even though it has had a positive return in 11 of the last 18 months. This lack of positive momentum has been caused by the overwhelming uncertainty regarding trade, politics and economic growth around the world in a time when the U.S. economy has continued to outpace economists’ predictions of potential growth. U.S. economic growth has remained around 3%, the unemployment rate is at a 50 year low and inflation remains well below the Federal Reserve’s target. Investors are cautious to bet on this environment though, believing that if an all-out trade war occurs with China and possibly other partners, that global growth could potentially slow or even decline. With all this in mind, the default mindset has been to wait and see for markets to figure out which side of the argument will give first, with the dull sentiment looking like it will continue for the foreseeable future. (Barron’s)

Nasdaq falls into Correction

The tech-heavy NASDAQ fell into correction territory on Friday, 10% below its high set in early May, after reports that the U.S. government is in the beginning stages of anti-trust investigations into companies like Google parent, Alphabet, and Facebook over data privacy and security issues. Tech companies have carried the U.S. stock market in recent years and weakness from the sector is making it increasingly difficult for the broader market to gain any momentum. With stalled China trade negotiations and the new anti-trust investigations in the U.S., tech’s two biggest markets are targeting the sector and ensures volatility within the sector will remain a challenge for investors. (Wall Street Journal)

Trade Targets Expand

As trade negotiations with China and Europe have stalled, the U.S. has begun to target more nations and see what concessions they receive. India and Mexico have been targeted by the U.S. in wildly different ways and reasons. The U.S. has informed India that it will lose its developing nation status that allows it to export goods the U.S. without tariff barriers, with a hope that India will use this opportunity to strike a trade deal to open up the huge nation to U.S. businesses and avoid future conflict. Mexico was hit with a direct 5% tariff on all goods, with increased border control by the Mexican government as the reasoning. If tariffs begin to be used as a political weapon, as opposed to an economic one, things will get much more complicated and potentially harmful for the U.S. economy and its relationships with other countries. (Wall Street Journal)

Quiz:

What has the best performing sector in the S&P 500 been so far in the 2019?

a. Consumer Staples

b. Industrials

c. Information Technology

d. Real Estate

Answer is below…

 

Have a good week!

 

Answer to quiz:

d. Real Estate has been the best performing sector so far this year with a return of 18.86%.