March 2018
Market Update
(all values as of 08.31.2020)

Stock Indices:

Dow Jones 28,430
S&P 500 3,500
Nasdaq 11,775

Bond Sector Yields:

2 Yr Treasury 0.14%
10 Yr Treasury 0.72%
10 Yr Municipal 0.81%
High Yield 5.38%

YTD Market Returns:

Dow Jones -0.38%
S&P 500 8.34%
Nasdaq 31.24%
MSCI-EAFE -6.23%
MSCI-Europe -7.39%
MSCI-Pacific -4.42%
MSCI-Emg Mkt -1.18%
 
US Agg Bond 6.85%
US Corp Bond 6.94%
US Gov’t Bond 8.09%

Commodity Prices:

Gold 1,973
Silver 28.43
Oil (WTI) 42.82

Currencies:

Dollar / Euro 1.19
Dollar / Pound 1.33
Yen / Dollar 105.37
Dollar / Canadian 0.76
 

How A Decreasing Dollar Is Good For U.S. Exports – Currency Overview

The dollar fell in January to its lowest levels since 2014 as central banks around the world started to reduce monetary stimulus efforts and raise rates.

As the economies and circumstances of individual countries change, so does their ability to export and import. A country’s ability to buy goods and services from other countries is based on the strength of its currency, while a country’s ability to export goods and services is based on the weakness of its currency.

As a nation’s currency lowers in value, relative to another nation’s currency, that country will be able to export more. This may sound counterintuitive, but devaluing a country’s currency is in itself a form of stimulus. The benefits of a devaluing currency for a nation’s economy include an increase in exports, which may result in additional manufacturing and employment.
      A significant hindrance of a devaluing currency would be imports becoming more expensive, thus indirectly causing inflationary pressures within an economy.

Since 1995, as the U.S. dollar has devalued, exports have been steadily increasing. As the U.S. dollar has been dropping, U.S. manufactured products have become less expensive for other countries worldwide. This dynamic is an important component for many U.S. companies operating globally.

Sources: Fed, Bloomberg, Commerce Dept.

 

 

 
Volatility has existed for years and will continue to exist for years to come

The Return Of Volatility – Equity Overview

Volatility drove all major equity indices lower, prompting a broad increase in trading activity. Regardless of negative news affecting the equity markets, optimism still exists among various analysts and economists.

Some analysts are revising their earnings estimates upward, which means that they believe companies will start to earn more. The benefits of a lower corporate tax rate and the onset of inflation will benefit various companies in different sectors. Inflation will benefit those companies that are capable of raising prices on their services and products, also known as pricing power.

Companies buying their own shares might provide additional fuel for the U.S. stock market following a wave of strong quarterly earnings reports and tax cuts that have left more cash on balance sheets.

Favorable earnings reports lifted equity prices in late February as U.S. companies reported that earnings were improving. According to Thompson Reuters, 77% of companies in the S&P 500 that had reported earnings as of the end of February had exceeded expectations, an optimistic sign.

Many believe that technology has led the market in adjusting much quicker to a changing rate environment, albeit with a higher level of volatility.

Volatility is an inherent part of the market that occurs when the markets undergo the digestion of new data and or occurrence that alters basic fundamentals and expectations of economic growth and company earnings. Volatility has existed for years and will continue to exist for years to come.

Market volatility is measured by the VIX® Index, which is owned and compiled by the Chicago Board of Exchange (CBOE). The index is calculated by estimating expected volatility for the S&P 500 index.

As of the close of business on February 28, 2018, the VIX Index stood at 19.85, up from 9.77 on January 2, 2018. For the past ten years, the VIX index has averaged a daily closing price of 20.02, almost identical as to where the index closed at the end of February. Different factors bring about volatility, this time it’s primarily the concern surrounding rising rates and inflation. Market volatility is a function of various factors such as a change in fiscal policy, monetary policy, trade policy, geopolitical events, weather, natural disasters, and currencies.

Historically, volatility has always existed and will undoubtedly continue to exist. Investors seeking to shelter their holdings from market volatility take different actions and use various strategies. Volatility is viewed from different perspectives as some see volatility as a hindrance while others view it as an opportunity. Regardless of how it is perceived, being prepared for future volatility is essential in sustaining valuations.(Sources: Bloomberg, Reuters, S&P, CBOE)