John Kirk

Ashland Investment Advisers

3858 Carson Street, Suite 120

Torrance, CA 90503


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


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

What A Tariff On Steel & Aluminum Means – Trade Policy

A report released on February 16th by the Department of Commerce prompted the President to enact tariffs on steel and aluminum imports entering the United States. The imposed tariffs, essentially a tax on steel imports of 25% and 10% on aluminum imports are in response to the findings of the Commerce Department report and carried out under Section 232 of the Trade Expansion Act of 1962.

Detailed in the Section 232 report are findings that excess imports into the United States of steel and aluminum pose a threat of “weakening of our internal economy” and “threaten to impair the national security” of the country.

The United States is the world’s largest importer of steel, with imports exceeding exports by nearly four times. Demand for steel and aluminum is driven by various industries including automotive, aerospace, consumer goods, and defense. Steel and aluminum are also indispensable materials used in building and expanding a country’s infrastructure.

Ten steel furnaces have closed since 2000, displacing over 52,000 U.S. steel workers since January 2000. Meanwhile, international production of steel is up over 127% since 2000, employing tens of thousands of workers globally. China is by far the largest producer of steel worldwide, as well as the largest source of excess capacity, which is why China is a target for the new tariffs. China alone produces more steel in one month than the U.S. does in a year.

Several countries are being targeted for the newly imposed steel tariffs, notably Canada, Brazil, South Korea, and Mexico. The Section 232 report has determined that these countries have been selling steel into the U.S. market at below market prices, thus dumping steel onto the market. The dumping practices of these countries has led to unfair competition by U.S. steel firms, not allowing them to gain market share. Meanwhile, world steelmaking capacity has increased 127% since 2000, reaching 2.4 billion metric tons. Global excess capacity is 700 million tons, nearly 30% of this total.

Between 2013 and 2016, U.S. aluminum industry employment fell by 68%. Six smelters shut down, and only two of the five remaining smelters are operating at full capacity, despite an increase in U.S. demand for primary aluminum. There is only one remaining U.S. producer of high-quality aluminum alloy needed for military aerospace needs, and maintaining and upgrading our infrastructure, which must be done for reasons of economic security, is a major use of aluminum.

Many are worried about what the impact will be for American consumers and businesses. Economists believe that the initial effect on consumers will be slightly higher prices for aluminum can products and autos. The automotive and aerospace industries will initially be impacted until U.S. steel and aluminum producers come online to restore ample supply. Many see the dynamics as short-term pain for long term gain.

(Sources: Dept. of Commerce, ITA Global Steel Trade Monitor, December 2017,

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)