MARKET UPDATES

July 1, 2020

In the face of a grim economic reality, stocks around the globe rose strongly during the second quarter. The Dow Jones Industrial Index surged 18%, its best quarter in 33 years. Consumer discretionary (e.g., Amazon.com) and technology shares (e.g., Microsoft & Apple) again led the way and are the only sectors of the market to produce gains so far in 2020. Consumer and tech companies in foreign markets also performed well, but those sectors represent a smaller share of exchanges outside the U.S., so foreign stocks slightly lagged.

The rally came in two distinct phases. The first was a relief rally precipitated by unprecedented fiscal stimulus in the form of the CARES Act and intervention by the Federal Reserve. Over a three week period beginning in late March stocks rose 30%. Markets generally traded flat to down for the next month as coronavirus cases and deaths rose, especially in the...

April 1, 2020

Just weeks into the new decade, the financial prosperity and tranquility that had prevailed for most of the previous decade was shattered. The culprit was none of the risks pondered so often and by so many; not military conflict nor a trade war, not too much debt nor another financial crisis. A novel coronavirus called COVID-19 originating from inland China has brought the global economy to a near standstill and sent financial markets tumbling. No part of the globe has been spared, and stock markets around the world have fallen by at least 20%.

As stunning as the magnitude of the drop in stock values has been, the speed with which it all happened was unprecedented. After reaching an all-time high February 12, the Dow Jones Industrial Average fell 20% in just 20 trading days, the fastest ever plunge into a “bear market” and nearly twice as fast as in 1929. The index then proceeded to fal...

January 10, 2020

Global stock markets rallied in the decade’s final quarter with nearly identical 9% gains in the U.S., Europe and Asia. For the full year, U.S., stocks held a slight edge, with the S&P 500 advancing 31%, while the Dow, mid-cap and small-cap indexes all gained roughly 25%. Despite the year’s huge gains, stocks generally didn’t recover 2018’s losses until the fourth quarter, after the U.S. and China agreed to a “phase one” trade deal, and following Boris Johnson’s resounding electoral victory in the U.K. Stocks were not alone in celebrating 2019. In a sharp reversal from last year, every major asset class produced positive returns, including bonds, gold and real estate.

Given how much of a headwind the uncertainty surrounding trade wars and Brexit had posed for markets, a positive reaction to these developments was to be expected. Whether the magnitude of that reaction is justified depend...

October 10, 2019

Amid heightened volatility, markets turned this way and that in the third quarter, only to end up about where they started. Both the Dow and S&P 500 indexes gained a little more than 1%. Bonds, like stocks, also advanced modestly as the Fed continued to lower interest rates amid a soft economic outlook. Overseas performance was similar, although U.S. investors in foreign markets suffered small losses due to foreign currency denominated investments losing value when translated back into a surging U.S. dollar.

Trump’s trade war with China continued to move markets, but signals from each side about the progress of talks, or lack thereof, were more muted than in Q2. In any event, the impact of the trade battle has moved from the theoretical to the empirical – with the impact being felt globally as far away as Japan and Germany, two countries that are especially dependent on trade in manufac...

July 5, 2019

It was anything but smooth sailing, but stock markets ended the second quarter in positive territory and posted their best first half since the dot-com era of the 1990’s. The S&P 500 logged gains of 4% for Q2 and 18% for the first half, and most major indexes broke records set last October. The bull market that began in March of 2009 is now on the cusp of becoming the longest in recorded history.​​

The outlook was darker in the middle of the quarter as trade tensions simmered between the U.S. and virtually all of its major trading partners. A short list of Trump’s activities in the month of May includes raising tariffs on $200B of Chinese imports from 10% to 25%; threatening 25% tariffs on $325B of additional imports; declaring imported cars from Europe and Japan a threat to national security; and threatening 5% tariffs on all Mexican imports. During this period US stocks lost 7%. Anxie...

April 5, 2019

U.S. stocks bounced back strongly from December’s swoon to turn in their best quarter in nearly 10 years. The S&P 500 rose 13%, the Dow added 11%, and the Nasdaq surged 16%. While technology companies led the way, the rally was broad-based, with all 11 sectors in the S&P advancing. This surge represented a remarkable turnaround from the fourth quarter of last year, when U.S. stocks sank an average of 15%. It’s not very often dramatic market moves can be attributed to a single factor. When stocks plunged a quarter ago, we pointed to a number of causes – trade wars, a slowdown in China, and Brexit – as contributing to a more pessimistic outlook. Progress on none of those issues has been great enough to explain this rebound. One factor can, however; the actions of Fed Chairman Jerome Powell.

Even before the Fed raised rates for a fourth time in a year last December, the Treasury yield...

January 11, 2019

Stock markets sank in the last quarter of 2018 with the S&P 500 and NASDAQ indexes entering “bear market” territory, defined as a decline of at least 20% from the most recent peak. While the Dow narrowly avoided the bear, most foreign markets fell even further, making this all but the official end of the nearly 10-year-old bull market. The 4th quarter declines dragged all U.S. indexes into the red for the worst annual losses since 2008. All in all, 2018 could hardly have been more different than 2017, a year that saw stocks rise relentlessly to new records.

With GDP growth near the fastest of this expansion, the reversal in markets stands in stark contrast to the performance of the U.S. economy. Unemployment is at records lows, job creation remains strong and consumer confidence, though dinged by the recent market plunge, remains high. Despite all of this, sentiment in the investment an...

October 8, 2018

After enduring a choppy start to 2018, US stocks rallied broadly in the third quarter with the Dow Jones Industrial index rising 9%. Every sector of the economy saw gains, with healthcare (+15%) and industrials (+10%) leading the way. Overseas markets were left behind as most major European and Asian indexes were flat. Japan proved the exception, but its 7% gain was partially offset by a 3% weakening of the yen to the dollar. The dollar also rallied against the Euro and most emerging market currencies, a trend that could undermine the President’s efforts to reduce the trade deficit. As we highlighted last quarter, rising trade and fiscal deficits pose a key risk to the medium-term outlook for the economy.

For now though, the US remains the world’s strongest economy. The private sector continues to add more jobs than there are people entering the workforce, a condition that has in the pa...

July 6, 2018

Donald Trump promised to dramatically accelerate economic growth in America by lowering taxes, cutting regulations, and bringing jobs back from overseas through better trade deals. In his first year, the President focused on the first two areas, where he enjoyed broad support from Republicans in Congress. Markets cheered the higher corporate profits that these policies promised, sending stocks to all-time highs. Now that the President has turned his attention to trade, however, the results have been choppy so far: foreign stock markets fell, while gains in the U.S. were concentrated in shares of small company and technology stocks that are perceived, rightly or wrongly, to be insulated in the event of a trade war.

The President brings a couple of core beliefs to his latest fight: (1) that the trade deficit is evidence that other countries take advantage of the U.S.; and (2) that a trade...

April 6, 2018

The new year began much like the last one ended, with markets closing at record highs seemingly every day. Then, without warning, volatility came roaring back. On Friday February 2, the Department of Labor issued its monthly report, which merely hinted that wage growth might finally be picking up. The Dow plunged an ominous 666 points. After taking the weekend to stew over what was actually a fairly pedestrian report, markets opened Monday in near panic, plunging 1600 points (6%) before recovering slightly to end down 1175, the largest ever one-day point drop. By the end of the week, the market was in an “official” correction, down more than 10% from the January 26 peak. That week began a period in which the market traded up or down at least 1% in 14 out of 19 trading days. For some context, the market made a 1% move only 10 times in all of 2017. Last quarter’s column discussed the ext...

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Marble Trail Financial is a joint venture of Addison Advisors LLC dba Marble Trail Advisors, Davis Associates,  and Misasi & Company LLC. Investment advisory services are provided by Marble Trail Advisors, a registered investment adviser, and tax preparation and accounting services are provided by Davis Associates and Misasi & Company LLC.

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