While investors kept tariffs and trade disputes in mind in August, a new earnings season provided Wall Street with a lift. Blue chips especially benefited: the Dow Jones Industrial Average rose 4.71% for the month. Broadly speaking, strong corporate profits and domestic economic data gladdened the bulls, even as question marks about global commerce flashed.(1)
Domestic Economic Health
Was the federal government about to enlarge tariffs on Chinese imports or relax them? The month ended with conflicting signals. In late July, Bloomberg reported that the Trump administration was considering hiking the 10% import taxes, which it planned to impose...
At the end of 2018, economists and journalists may look back on the second quarter and see the moment when a global trade war began. Whether one is truly underway or not, the fact is that Q2 was a good quarter for equities. The S&P 500 gained 2.93% in three months, and while the blue chips had their struggles, tech shares ascended once again.
In May, investors were left to interpret mixed geopolitical and financial signals. The historic U.S.-North Korea summit was on, then off, then possibly on again. An apparent truce emerged in the U.S.-China tariffs battle, but it did not last. Oil rallied, but then prices fell. Federal Reserve policy meeting minutes indicated central bank officials would accept above-target inflation for a while. Other economic signals were clear: new and existing home sales were down, consumer confidence was back up, and consumer spending was strong. In the end, the markets took all this in stride – the S&P 500 rose 2.16% for the month.(1)
April saw the S&P 500 advance 0.27% as a new earnings season unfolded – one in which investors grew uneasy about rising Treasury yields, protectionism, and privacy concerns involving tech giants. While the financial media largely focused on those anxieties, good news also appeared. The latest consumer spending and consumer confidence data was solid. Home buying picked up as listings increased slightly. Oil rallied, and so did the dollar.
Stocks rallied in January, corrected in February, and slumped in March as volatility and economic policy changes took some of the enthusiasm out of the market. The placid market climate of 2017 vanished, giving way to trading sessions marked by significant ups and downs.
Investors certainly received a wake-up call in February. A correction hit Wall Street for the first time in nearly two years, and benchmarks overseas were also challenged. Two weeks later, though, the S&P 500 had gained back more than half of what it had lost in the dive. Prices of important commodities sank early in the month, but recoveries followed.
Bulls took charge of Wall Street as 2018 began: the Dow Jones Industrial Average rose 5.79% in the first month of the year, even with a mild selloff on the verge of February. Foreign equity benchmarks largely advanced as well. Oil and gasoline futures surged, while bitcoin continued to rollercoaster. Personal spending, manufacturing, and consumer confidence data encouraged investors. Home sales weakened as home prices surpassed a pre-recession peak and mortgage rates increased. Analysts kept warning that Wall Street was overdue for a pullback; while indices did slip late in the month, optimism was little shaken.
Financially speaking, the last month of 2017 was also the year’s most newsworthy. Congress reformed federal tax law to a degree unseen since the 1980s, the Federal Reserve raised the benchmark interest rate, and bitcoin took its investors for a wild ride. Hiring, retail sales, and personal spending numbers were all impressive, as were consumer confidence index readings. The residential real estate market showed more momentum.
In November, the S&P 500 gained 2.81% and advanced for a thirteenth straight month – an unprecedented milestone in the index’s long history. Consumer confidence and investor confidence were both abundant, as further evidence arrived that the economy was growing at an impressive rate. Solid fundamental indicators, upbeat earnings announcements, and hopes for 2018 tax cuts motivated stock gains in the U.S.; though many foreign benchmarks slumped. Oil took steps toward $60. Home sales picked up after a late-summer lull. Wall Street anticipated a year-end rate hike from the Federal Reserve.(1,2)
October saw the S&P 500 rise 2.22% in response to results from the fall earnings season, encouraging fundamental indicators, and anticipation of tax reforms. An impressive jump in personal spending complemented excellent readings on consumer confidence and purchasing manager indices; although, hiring suffered a setback. As the European Union contended with disunity in Spain, the European Central Bank revealed its exit strategy for its bond-buying campaign. Asian and European stock exchanges witnessed major gains. Home sales numbers improved, and sugar, unleaded gasoline, and oil made major advances in the commodities sector. Investors, trader...