Volatility Continues

Posted By: Ryan Kimes, CFP

Weekly Update – December 10th, 2018

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Markets went for another wild ride last week, as major domestic indexes swung back and forth. By Friday, December 7, markets had posted their worst weekly performance since March—and the S&P 500 and Dow both moved into negative territory for 2018.

Overall, the S&P 500 lost 4.60%, the Dow declined 4.50%, and the NASDAQ dropped 4.92%. International stocks in the MSCI EAFE also struggled, posting a 2.27% weekly loss.

Let’s take a look at what is driving this challenging market performance.

Examining Recent Volatility

1. How volatile are stocks right now?

If recent market fluctuations have felt intense to you, there’s a reason: They are. The past three weeks have had the most volatility since 2008’s financial crisis. During this time, domestic indexes have ricocheted between gains and losses. The large swings have occurred both week-to-week and within daily trading.

2. What is causing the volatility?

Many of the same themes we’ve discussed throughout 2018 are continuing to affect market behavior. Ultimately, many investors are worried that corporate profits and global growth will suffer if trade tension persists and the Federal Reserve continues raising interest rates.

Concerns about Treasury yields were also on investors’ minds. For part of last week, 3-year Treasury notes had higher yields than 5-year notes. Called an inversion, a higher yield on shorter-term Treasuries can be a sign of a coming recession. The yield spread between 2-year and 10-year Treasury notes, which people focus on more, has not inverted.

3. Should you feel concerned?

With many headlines to digest, from conspiracy charges against a Chinese tech leader to comments from the Fed, investors had a lot to consider last week. The difference is how they reacted to this information. For some time, markets were basically ignoring headlines. Now, they’ve moved in the opposite direction into what one investment manager called “a period of hypersensitivity.”

Consequently, recent market performance may seem unnerving. As is often the case, however, the reality may be less extreme than what appears at first glance, especially when you look at the fundamentals.

4. What do the fundamentals tell us?

While last week’s market performance saw large fluctuations, the fundamentals we received were far less dramatic. We learned that two sectors beat expectations in November: manufacturing and service. Further, the November labor report revealed fewer new jobs than anticipated, but unemployment is still at historically low levels, as job and wage growth continue.

Remember, risks exist in the markets and economy, and we’re analyzing these details closely. If you have any questions about your financial standing or anything you hear in the news, we are here to talk.

ECONOMIC CALENDAR

Monday: JOLTS

Tuesday: PPI-FD

Wednesday: CPI

Thursday: Jobless Claims

Friday: Retail Sales, Industrial Production

[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[1] https://www.msci.com/end-of-day-data-search

[1] https://www.bloomberg.com/news/articles/2018-12-07/stocks-drubbing-vexes-fund-managers-as-year-end-pressure-mounts?srnd=premium

[1] https://www.bloomberg.com/news/articles/2018-12-07/stocks-drubbing-vexes-fund-managers-as-year-end-pressure-mounts?srnd=premium

[1] https://www.cnbc.com/2018/12/07/stock-market-dow-futures-fall-ahead-of-unemployment-figures.html

[1] https://www.bloomberg.com/news/articles/2018-12-06/asia-signals-mixed-start-for-stocks-yields-drop-markets-wrap?srnd=markets-vp

[1] https://www.cnbc.com/2018/12/07/stock-market-dow-futures-fall-ahead-of-unemployment-figures.html

[1] https://www.ftportfolios.com/Commentary/EconomicResearch/2018/12/3/the-ism-manufacturing-index-rose-to-59.3-in-november

https://www.ftportfolios.com/Commentary/EconomicResearch/2018/12/6/the-ism-non-manufacturing-index-rose-to-60.7-in-november

[1]http://wsj-us.econoday.com/byshoweventfull.asp?fid=485662&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

Why Stocks Are Dropping

Posted By: Ryan Kimes, CFP

Weekly Update – November 26th, 2018

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Last week was a tough one for markets. The S&P 500 dropped 3.79% and experienced its worst results during a Thanksgiving week since 1939. While the index officially entered correction territory on Friday, it closed 10.2% below its most recent record high. Meanwhile, the Dow and NASDAQ continued the downward trend, losing 4.44%, and 4.26%, respectively. International stocks in the MSCI EAFE also declined, posting a 1.12% loss.

Reading these results may feel quite unpleasant and elicit concerns about what is ahead. As is often the case, the story behind the numbers can help us understand the complexity and what this performance means.

Why did stocks drop?

Plummeting oil prices were one of the biggest drivers behind the market’s losses, as investors worried that too much oil is available. These concerns have contributed to oil experiencing seven weeks of losses in a row and dropping more than 20% so far this month.

While oil was a key focus last week, many other details were also on investors’ minds. Major tech companies continued to struggle and posted sizable losses for the week. In addition, the markets still don’t know how the Brexit deal, political challenges in Europe, and ongoing trade tension will all work out.

Examined together, these challenges can create questions about the strength of global growth.

Will the market losses continue?

No one can predict the future, but a few data points and perspectives can help deepen understanding of the current environment. We believe the following two details are important for you to know:

1. Trading was light last week: The days before and after Thanksgiving had trading volume that was much lighter than normal, which often happens during this time period. This lower volume can exacerbate pricing trends, such as the declines we saw with oil. As a result, Friday’s performance may be less significant than it seems on the surface.

2. Black Friday shopping was strong: Brick-and-mortar stores had people lined up for discounted buys, and online purchases were 28.6% higher than in 2017. The holiday season is very important for retailers, and these initial results indicate consumer spending may remain strong through year’s end.

In the coming weeks, we will gain a clearer understanding of many market influences. President Trump and Chinese President Xi are scheduled to meet this week at the G20 summit to discuss trade. Right now, the markets may be assuming these talks won’t solve the trade tension and that an economic slowdown could be ahead. Investors may also doubt whether oil-producing countries can slow production fast enough to counter reduced demand.

Other experts believe we are experiencing a disconnect between what investors are feeling and what is truly happening in the economy. As a result, a so-called “Santa Claus” rally could occur as consumer spending continues during the holiday season.

But these perspectives are opinions, not a crystal ball. No one can say for sure how these complex scenarios will play out. Rather than rely on guesswork or headlines, we’ll continue to look for clear trends and insight that support your long-term goals. If you have questions or want to talk about your current investments and strategy, we are here for you.

ECONOMIC CALENDAR

Tuesday: Consumer Confidence, FHFA House Price Index

Wednesday: GDP, New Home Sales

Thursday: Pending Home Sales Index, Jobless Claims

https://www.bloomberg.com/news/articles/2018-11-22/asia-stocks-to-slip-end-weekly-drop-pound-jumps-markets-wrap?srnd=markets-vp

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

https://www.reuters.com/article/us-usa-stocks/wall-street-drops-sp-500-confirms-correction-idUSKCN1NS1FA

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

https://www.msci.com/end-of-day-data-search

https://www.reuters.com/article/us-usa-stocks/wall-street-drops-sp-500-confirms-correction-idUSKCN1NS1FA

https://www.reuters.com/article/us-global-oil/oil-plunges-nearly-8-percent-despite-talk-of-output-cut-idUSKCN1NS012

https://www.cnbc.com/2018/11/23/stock-markets-dow-set-for-losses-as-trading-resumes-for-half-day.html

https://www.bloomberg.com/news/articles/2018-11-22/asia-stocks-to-slip-end-weekly-drop-pound-jumps-markets-wrap?srnd=markets-vp

https://www.bloomberg.com/news/articles/2018-11-22/asia-stocks-to-slip-end-weekly-drop-pound-jumps-markets-wrap?srnd=markets-vp

https://www.marketwatch.com/story/when-does-the-stock-market-close-on-black-friday-2018-11-23?dist=markets

https://www.marketwatch.com/story/6-key-reasons-the-bottom-is-falling-out-of-oil-prices-on-black-friday-2018-11-23

https://www.reuters.com/article/us-usa-stocks/wall-street-drops-sp-500-confirms-correction-idUSKCN1NS1FA

https://www.marketwatch.com/story/stocks-poised-to-open-lower-in-black-friday-trade-notch-weekly-loss-of-more-than-3-2018-11-23?dist=markets

https://www.reuters.com/article/us-usa-stocks/wall-street-drops-sp-500-confirms-correction-idUSKCN1NS1FA

https://www.reuters.com/article/us-global-oil/oil-plunges-nearly-8-percent-despite-talk-of-output-cut-idUSKCN1NS012

https://www.marketwatch.com/story/stocks-poised-to-open-lower-in-black-friday-trade-notch-weekly-loss-of-more-than-3-2018-11-23?dist=markets

Analyzing the Data within Market Declines

Posted By: Ryan Kimes, CFP

Weekly Update – November 20th, 2018

 *The 11/16/18 performance numbers for the Dow comparing the past week’s results Year-to-date, and to the previous 1, 5, and 10 years results were not available at the time this chart was published.

*The 11/16/18 performance numbers for the Dow comparing the past week’s results Year-to-date, and to the previous 1, 5, and 10 years results were not available at the time this chart was published.

Markets experienced more volatility last week, as perspectives on trade, tech, and retail pulled investor sentiment back and forth. Although domestic indexes were up on Friday, November 16, they still posted losses for the week. In all, the S&P 500 dropped 1.61%, the Dow declined 2.22%, and the NASDAQ gave back 2.15%. International stocks in the MSCI EAFE ended the week down 1.51%.

A major topic over the past couple weeks has been the ongoing, significant declines in oil prices. Last week, we did experience one turnaround—on Friday, signs that oil production may decrease next month helped oil prices start to rebound. This pricing increase contributed to S&P 500 energy stocks rising 1.1%.

In addition to oil’s current trajectory, let’s examine some of the key October data we received last week:

Retail Sales Beat Projections

October’s retail sales were the highest in 5 months—up 4.6% from this time last year. While some of this growth comes from rebuilding efforts after the latest hurricanes, the overall data suggests that consumer spending remains strong. As a result, we may be able to expect ongoing economic growth.

Inflation Picked Up

The consumer price index had its largest monthly increase since the beginning of 2018. From gas to rent to cars, U.S. retail prices rose in October. Inflation is still relatively stable, however, which should mean that the Federal Reserve will continue on its current, gradual path of interest-rate increases.

Industrial Production Increased

Industrial production only grew by 0.1% in October, but the latest data also indicated that previous months were higher than originally thought. In fact, mining reached its highest point ever in August as production of oil and gas surged. Ultimately, this report paints a somewhat mixed picture for manufacturing: For now, output remains solid, but manufacturers have several concerns, including trade and global growth. Production has slowed since August, and we’ll now have to wait to learn whether this decline continues or rebounds.

Examined together, last week’s data may show that the economy still has strength, but questions remain. We will continue to monitor these and many other reports to help gain a clearer perspective on what may lie ahead.

As we look to this week, we want to take a moment to say thank you for being one of our valued clients. We recognize the trust you place in our team and are thankful for your relationship during this holiday—and every week of the year.

ECONOMIC CALENDAR

Monday: Housing Market Index

Tuesday: Housing Starts

Wednesday: Durable Goods Orders, Consumer Sentiment, Existing Home Sales, Jobless Claims

Thursday: Thanksgiving Day

Friday: NYSE Early Close

https://www.bloomberg.com/news/articles/2018-11-15/asia-stocks-to-track-u-s-gain-brexit-slams-pound-markets-wrap?srnd=markets-vp https://www.reuters.com/article/us-usa-stocks/sp-dow-advance-on-trade-optimism-nvidia-sinks-nasdaq-idUSKCN1NL1K9 http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJItr&region=usa&culture=en-US http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

https://www.msci.com/end-of-day-data-search

https://www.reuters.com/article/us-usa-stocks/sp-dow-advance-on-trade-optimism-nvidia-sinks-nasdaq-idUSKCN1NL1K9

https://www.ftportfolios.com/Commentary/EconomicResearch/2018/11/15/retail-sales-rose-0.8percent-in-october

https://www.cnbc.com/2018/11/15/us-retail-sales-oct-2018.html

https://www.marketwatch.com/story/consumer-inflation-posts-biggest-jump-in-nine-months-on-higher-cost-of-gas-rent-used-cars-cpi-shows-2018-11-14

https://www.marketwatch.com/story/industrial-production-inches-up-in-october-as-fed-finds-record-mining-output-2018-11-16

The Impact of Oil and Elections

Posted By: Ryan Kimes, CFP

Weekly Update – November 14th, 2018

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Last week, markets experienced a 4-day winning streak before dropping on Friday, November 9. Despite those losses, domestic indexes posted gains for the week. The S&P 500 increased 2.13%, the Dow added 2.84%, and the NASDAQ was up 0.68%. International stocks in the MSCI EAFE had slight growth, ending the week up 0.20%.

From interest rates to corporate profits, investors had a number of topics to consider. In this update, we want to focus on two key details that drove markets: oil prices and midterm election results.

Oil Prices Declined

Oil prices continued to fall last week, posting the most consecutive daily declines in at least three decades. In fact, West Texas Intermediate (WTI) futures, a key oil benchmark, is officially in bear market territory. WTI has fallen more than 20% below its highest point over the past year.

What does this drop mean for markets?

Some investors believe the price declines are another sign that the global economy is slowing down. Historically, people have used oil prices as one way to decipher economic health because they can correlate with global growth. When crude oil prices drop, greater economic challenges are often ahead.

This recent decline may have a less concerning explanation. The United States sanctioned Iran last week while allowing eight nations to continue buying oil from the country for now. All of these waivers resulted in 1 million more barrels of Iranian oil being on the market than expected, the opposite of the anticipated tightening supply.

Bottom line: The oil price decline may be more of a symptom of disrupted supply and demand, rather than an indication of the global economy’s health.

Midterm Elections Brought Few Surprises

The long-awaited midterm elections occurred last week, and the results matched

expectations for a split Congress. These results contributed to the midweek market rally we experienced.

How could the results affect markets?

Post-midterm market results are generally strong. Over the past 18 midterm elections, stocks have always had positive returns from their lows in October to the year’s end. Some investors even believe that October’s struggles were a sign of the markets pricing in the election results about a month early.

Taking a historical, long-term view, the current arrangement of a Republican president and a split Congress has resulted in 12% annual returns since 1936. The chart below shows how markets have performed through each potential party-control scenario.

Although stocks have often done well when Washington experiences gridlock, the current scenario also makes a government shutdown or increased investigations into President Trump more likely. With either of these actions, market volatility could follow.

Bottom line: The election results could help bolster market performance. The split Congress also brings potential for political uncertainty that increases volatility for investors.

In many ways, this week’s market behavior underscores the complex, interconnected relationships between geopolitics and the markets. If you have any questions or would like to dive deeper into how these situations affect your financial life, we’re here to talk.

ECONOMIC CALENDAR

Monday: U.S. Holiday: Veterans Day observed           

Wednesday: CPI

Thursday: Retail Sales, Import and Export Prices, Business Inventories, Jobless Claims

Friday: Industrial Production

11.14.18.2.PNG

https://www.marketwatch.com/story/dow-looks-set-to-sink-by-triple-digits-after-fed-update-as-oil-extends-fall-2018-11-09?dist=markets

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

https://www.msci.com/end-of-day-data-search

https://www.cnbc.com/2018/11/09/stock-market-us-futures-lower-after-fed-decision.html

https://www.reuters.com/article/us-usa-stocks/oil-slide-china-worries-send-wall-street-tumbling-idUSKCN1NE1GQ

https://www.cnbc.com/2018/11/09/stock-market-us-futures-lower-after-fed-decision.html

https://www.investopedia.com/terms/w/wti.asp

https://www.marketwatch.com/story/stock-market-investors-wrestle-with-a-glut-of-bearish-signs-as-oil-prices-plunge-2018-11-10

https://www.reuters.com/article/us-usa-stocks/oil-slide-china-worries-send-wall-street-tumbling-idUSKCN1NE1GQ

https://www.marketwatch.com/story/stock-market-investors-wrestle-with-a-glut-of-bearish-signs-as-oil-prices-plunge-2018-11-10

https://www.marketwatch.com/story/stock-market-investors-wrestle-with-a-glut-of-bearish-signs-as-oil-prices-plunge-2018-11-10

https://www.bloomberg.com/news/articles/2018-11-07/this-time-stocks-got-it-right-now-about-that-october-rout

https://www.cnbc.com/2018/11/09/stock-market-us-futures-lower-after-fed-decision.html

https://www.bloomberg.com/news/articles/2018-11-07/this-time-stocks-got-it-right-now-about-that-october-rout

https://www.cnbc.com/2018/11/05/market-history-shows-investors-should-hope-for-gridlock-on-election-day.html

https://www.cnbc.com/2018/11/05/market-history-shows-investors-should-hope-for-gridlock-on-election-day.html

https://www.cnbc.com/2018/11/05/market-history-shows-investors-should-hope-for-gridlock-on-election-day.html

Markets Bounce Back

Posted By: Ryan Kimes, CFP

Weekly Update – November 7th, 2018

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Markets posted strong gains last week after struggling for much of October. The S&P 500 had its best weekly performance since May, and the NASDAQ had its first positive week since September. Despite domestic markets dropping on Friday, November 2, the S&P 500 added 2.42%, the Dow increased 2.36%, and the NASDAQ gained 2.65%. International stocks in the MSCI EAFE were also up 3.34%.

What drove market performance last week?

We received a fair amount of data and reports, with the following details holding particular weight for investors:

•U.S.–China trade updates were inconsistent.

Stocks fluctuated widely on Friday, in large part because of contradictory updates on a potential trade deal between the U.S. and China. President Trump said the two countries are a lot closer to an agreement. Larry Kudlow, Trump’s economic advisor, shared a different perspective, indicating the U.S. is not working out a trade deal with China. These conflicting reports contributed to volatility in the markets as investors tried to determine exactly where we stand.

•U.S. corporate earnings were strong but imperfect.

So far, the 3rd quarter earnings season has been a strong one. Of the 74% of S&P 500 companies that have released their data, 78% have beaten their earnings-per-share estimates, and earnings have grown 24.9% year-over-year. However, concerns for at least one major tech company’s projections affected investor behavior. In addition, analysts predict that in 2019, earnings growth will not match the double-digit results we’ve experienced this year.

•Labor market growth beat expectations.

The economy added 250,000 jobs in October, a stronger increase than expected. Wages also rose, posting 3.1% growth over the prior year, the fastest annual growth since 2009. Investors interpreted these results to mean that the Federal Reserve would continue raising interest rates at its projected pace.

Where should you go from here?

If you felt at all whipsawed by last week’s price fluctuations, especially after October’s declines, you weren’t alone. Even if you know that market volatility is normal, it can feel intense in the moment. Right now, many investors are also jumping in and out of popular, crowded stocks, causing market levels to shift more quickly than many people are used to. To navigate these accelerated changes, you need to remove emotion from investing decisions and stick to your long-term vision even more.

Rather than trying to predict what stocks will do in the immediate future, we are here to help you plan for the financial life and legacy you desire. Please let us know if you have any questions about where you are and how to pursue your future.

ECONOMIC CALENDAR

Monday: ISM Non-Manufacturing Index

Tuesday: JOLTS

Thursday: Jobless Claims

Friday: PPI-FD, Consumer Sentiment

https://www.bloomberg.com/news/articles/2018-11-01/asia-stocks-to-extend-rally-after-trump-xi-call-markets-wrap?srnd=markets-vp

https://www.marketwatch.com/story/dow-aims-for-4th-gain-in-a-row-ahead-of-jobs-report-apples-stock-sinks-on-outlook-2018-11-02?dist=markets

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

https://www.cnbc.com/2018/11/02/stock-market-triple-digit-gains-for-dow-nonfarm-payrolls.html

https://www.msci.com/end-of-day-data-search

https://www.cnbc.com/2018/11/02/stock-market-triple-digit-gains-for-dow-nonfarm-payrolls.html

https://www.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_110218.pdf

https://www.cnbc.com/2018/11/02/stock-market-triple-digit-gains-for-dow-nonfarm-payrolls.html

https://www.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_110218.pdf

https://www.ftportfolios.com/Commentary/EconomicResearch/2018/11/2/nonfarm-payrolls-rose-250,000-in-october

https://www.bloomberg.com/news/articles/2018-11-01/asia-stocks-to-extend-rally-after-trump-xi-call-markets-wrap?srnd=markets-vp

https://www.bloomberg.com/news/articles/2018-11-02/bulls-sit-still-as-u-s-stock-reversals-land-with-record-force?srnd=markets-vp

Why Are Stocks Dropping?

Posted By: Ryan Kimes, CFP

Weekly Update – October 30th, 2018

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Last week did nothing to dispel October’s reputation as a tough month for the markets. The S&P 500 lost 3.94%, the Dow declined 2.97%, and the NASDAQ dropped 3.78% during what was one of 2018’s most volatile weeks so far. All three indexes are down significantly for the month, and both the S&P 500 and Dow have entered negative territory for 2018. International stocks in the MSCI EAFE also struggled, posting a 3.87% drop for the week, and a 13.31% decline for the year.

Why did stocks drop? Will they continue to do so?

Currently, many topics are on investors’ minds, from inflation to tariffs to valuations and beyond, but analysts are not pointing to one single culprit for last week’s performance. Instead, a mixture of concerns, with a large dose of emotion, seemed to drive the markets.

Emotional reactions are understandable when volatility emerges, but they have no place in long-term investment strategies. Instead, we need to focus on the fundamentals.

What did we learn last week?

Trying to find simple explanations for market behavior can feel impossible, in part because the markets aren’t a machinethey’re a reflection of many human actions. Investors make choices based on their interpretations of current conditions, and the effects of these decisions become “market performance.”

Amidst the volatility, we received several updates on the economy, including:

3rd Quarter Gross Domestic Product (GDP) beat expectations: The initial GDP reading for the 3rd quarter came in at a strong 3.5%, helped in large part by consumer spending.

Corporate earnings have been strong, but imperfect: So far, this corporate earnings season is showing 22% growth, but fewer S&P 500 companies are exceeding analysts’ predictions than in the 1st quarter of 2018. In particular, some major tech companies’ results disappointed investors.

Housing continued to struggle: New home sales were lower than expected in September, which followed disappointing results from existing-home sales data, as well.

Inflation growth eased: The Personal Consumption Expenditures Price Index, which shows inflation, increased by 1.6% in the 3rd quarter, much lower than projected.

Examined together, this data indicates that while the economy has potential challenges, it also demonstrates solid growth, reasonable inflation, and strong corporate performance. That story feels different than the sharp drop we experienced last week. However, when you look at the bigger picture, our current circumstances provide another reminder that volatility is normal, and examining economic fundamentals is critical.

Still, risks exist, and in the coming weeks we will pay very close attention to data and performance. In particular, we will follow the Federal Reserve’s comments and actions to see what may lie ahead for interest rates. In the meantime, please let us help answer your questions and address your concerns. We are here to help you pursue your goals, in every market environment.

ECONOMIC CALENDAR

Monday: Personal Income and Outlays

Tuesday: Consumer Confidence

Wednesday: ADP Employment Report

Thursday: PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending, Jobless Claims

Friday: Employment Situation, Factory Orders

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

https://www.bloomberg.com/news/articles/2018-10-25/asia-stocks-set-to-rally-on-u-s-gains-bonds-slip-markets-wrap?srnd=markets-vp

https://www.cnbc.com/2018/10/26/stock-market-us-futures-show-drop-for-dow.html

https://www.msci.com/end-of-day-data-search

https://www.bloomberg.com/news/articles/2018-10-25/sell-offs-are-normal-but-this-week-is-shocking-the-pros

http://wsj-us.econoday.com/byshoweventfull.asp?fid=485684&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

https://www.reuters.com/article/us-usa-stocks-weekahead/mixed-u-s-inflation-signals-leave-investors-adrift-idUSKCN1N01F6

http://wsj-us.econoday.com/byshoweventfull.asp?fid=485959&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

https://www.cnbc.com/2018/10/26/first-read-on-us-q3-2018-gross-domestic-product.html

Examining October's Historical Market Volatility

Posted By: Ryan Kimes, CFP

Weekly Update – October 25, 2018

 Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Stock performance was mixed last week as investors considered the impact of interest rates, international affairs and corporate earnings. The S&P 500 gained 0.02%, and the Dow added 0.41% to post its first weekly gains in October. The NASDAQ declined 0.64% and extended its losing streak. International stocks in the MSCI EAFE dropped by 0.08%.

While the final weekly results showed relatively little growth or loss, the week included some volatility. So far, domestic indexes have struggled this month. As of October 19, the S&P 500 and Dow had each lost more than 3% for the month, and the NASDAQ was down 7%.

As we have often discussed in our market updates, volatility may feel uncomfortable, but market fluctuations are normal. That perspective becomes especially relevant in October, which is considered the most volatile month for markets.

Examining October History

Historical performance can’t predict future results. However, we do believe that understanding what makes October unique can help provide context for the current environment.

•Significant market events

For generations, many of the most significant market events have taken place in October, including the crash of 1929 and multiple large drops in 2008. In addition, last Friday, October 19, marked the 31st anniversary of the “Bloody Monday” market crash. On that date in 1987, the S&P 500 lost over 20% of its value.

•Higher than normal volatility

Since 1950, the S&P 500 has experienced more 1% moves in October than any other month. The month has also been the Dow’s most volatile since its beginning in 1896.

•Surprising performance

Despite the large events and high volatility that October can bring, its results may be stronger than expected. For the past 20 years, October has had the strongest performance of any month.

Exactly how this month will end remains to be seen, as we still have a few trading days left. But we hope that understanding how much markets often move in October will help you ride out any future volatility with more confidence. Of course, we’re also here to provide any answers or information you need, so contact us any time.

ECONOMIC CALENDAR

Wednesday: New Home Sales

Thursday: Durable Goods Orders, Jobless Claims

Friday: GDP, Consumer Sentiment

https://www.cnbc.com/2018/10/19/wall-street-futures-point-to-a-slight-rebound-after-the-dow-sheds-300-points.html

https://www.cnbc.com/2018/10/19/wall-street-futures-point-to-a-slight-rebound-after-the-dow-sheds-300-points.html

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

https://www.msci.com/end-of-day-data-search

https://www.cnbc.com/2018/10/19/wall-street-futures-point-to-a-slight-rebound-after-the-dow-sheds-300-points.html

https://www.cnbc.com/2018/10/19/wall-street-futures-point-to-a-slight-rebound-after-the-dow-sheds-300-points.html

https://www.marketwatch.com/story/fasten-your-seat-belt-october-is-almost-here-2018-09-25

https://www.cnbc.com/2018/10/15/this-chart-shows-why-october-has-such-a-scary-reputation-on-wall-street.html

https://www.marketwatch.com/story/dow-poised-to-jump-100-points-at-the-open-as-stock-market-aims-to-follow-china-rebound-2018-10-19?dist=markets

https://www.cnbc.com/2018/10/15/this-chart-shows-why-october-has-such-a-scary-reputation-on-wall-street.html

https://www.marketwatch.com/story/should-investors-fear-october-a-historic-jinx-month-for-stocks-2018-09-26

https://finance.yahoo.com/video/ryan-detrick-markets-210928786.html?format=embed

Understanding Why Markets Are Highly Volatile

Posted By: Ryan Kimes, CFP

Weekly Update – October 15, 2018

10.15.18.PNG

Volatility was back in full force last week. The three major domestic indexes posted several days of losses before experiencing wide swings on Friday. By week’s end, the Cboe Volatility Index (VIX), which investors use to help measure fear in the markets, had increased by approximately 70%. The VIX also reached its highest point since February.

Despite a number of equities posting last-minute gains on Friday, all three domestic indexes had sizable losses for the week. In fact, they posted their worst weekly performance since March. The S&P 500 dropped 4.10%, the Dow declined 4.19%, and the NASDAQ gave back 3.74%. International stocks in the MSCI EAFE also lost ground, decreasing 3.96%.

What drove market performance last week?

As is typically the case, a number of details affected investor sentiment and behavior. The following topics were among the perspectives impacting performance:

Rising interest rates: In addition to the Fed’s interest rate increases, 10-year Treasury yields are on many investors’ minds. At one point last week, the 10-year reached its highest yields since 2011. As interest from banks and bonds rise, some investors exit the markets in search of more predictable returns. These moves can cause stock prices to drop. However, we want to remind you of what we wrote about last week: Rising rates may bring their own risks, but they are a sign that the economy is growing.

Falling tech prices: Technology companies have been the best market performers in 2018. However, the sector just experienced its worst weekly results since this spring. With this shift in industry performance, some market participants have begun searching for different ways to invest their money.

Ongoing trade tension: While many analysts believe interest rates and tech prices drove last week’s losses, some feel that our trade renegotiation with China is to blame. We do not yet know how this skirmish will resolve, but tariffs do have the possibility to slow economic growth and increase prices for consumers.

These concerns and perspectives are important, but they do not give a complete understanding of our current economic conditions. Consumer sentiment remains high, and the latest corporate earnings season is likely to show strong, double-digit earnings growth for companies.

We know that volatility can feel uncomfortable, but it is normal. In the past 38 years, the markets have averaged a 13.8% intra-year declineyet 29 of those years had positive returns.

As always, we are continuing to monitor economic fundamentals and investor perspectives to find a clear view of where we are today, and what may be ahead. If you have any questions, we are here for you.

ECONOMIC CALENDAR

Monday: Retail Sales

Tuesday: Industrial Production, Housing Market Index

Wednesday: Housing Starts

Thursday: Jobless Claims

Friday: Existing Home Sales

[1] https://www.cnbc.com/2018/10/12/us-markets-data-and-bank-earnings-in-focus.html

[1] https://www.cnbc.com/2018/10/12/us-markets-data-and-bank-earnings-in-focus.html

[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[1] https://www.msci.com/end-of-day-data-search

[1] https://www.bloomberg.com/news/articles/2018-10-12/another-gut-wrenching-week-puts-2018-stocks-in-with-bad-company?srnd=markets-vp

[1] https://www.forbes.com/sites/markavallone/2018/10/11/5-reasons-why-higher-interest-rates-matter/#50fabc87577d

[1] https://www.investopedia.com/investing/how-interest-rates-affect-stock-market/

[1] https://www.cnbc.com/2018/10/12/us-markets-data-and-bank-earnings-in-focus.html

[1] https://www.bloomberg.com/news/articles/2018-10-12/another-gut-wrenching-week-puts-2018-stocks-in-with-bad-company?srnd=markets-vp

[1] http://fortune.com/2018/10/11/trump-federal-reserve-powell-lagarde-carney/

[1] https://www.businessinsider.com/trump-trade-war-tariffs-china-effect-2018-10

[1] http://wsj-us.econoday.com/byshoweventfull.asp?fid=485860&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

https://www.cnbc.com/2018/10/12/us-markets-data-and-bank-earnings-in-focus.html

[1] https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-the-markets/viewer  p.14

[1] https://www.goodhousekeeping.com/food-recipes/easy/a23008885/pumpkin-bread/

[1] https://www.irs.gov/newsroom/taxpayers-should-check-out-these-helpful-tax-tools

[1] https://www.golfdigest.com/story/never-clank-one-off-a-branch-again

[1]https://www.consumerreports.org/exercise-fitness/benefits-of-walking/