A Wild 1st Quarter Comes to an End
Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 03/30/18. Rates and Economic Calendar Data from Bloomberg as of 04/03/18. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.
Stocks rebounded a bit last week but failed to recover from the prior week’s decline and ended the first quarter in the red. Both the S&P 500 and the Russell Midcap Indexes gained 2.1%, while the Russell 2000 Index, a measure of the Nation’s smallest publicly traded firms, gained 1.3% last week. On the international front, developed markets gained 1.1% last week while emerging markets finished the week unchanged. Over in fixed income, the yield on the 10 year U.S. Treasury note declined again, falling 8 basis points to 2.74% from 2.82%.
The first quarter of 2018 has now officially wrapped up and what a quarter it was! Equity markets started strong out of the gates gaining 5.7% in January. Then, the roller coaster ride began with volatility spiking and the stock market experiencing consecutive losses of -3.9% in February and -2.2% in March. For the quarter, the S&P 500 Index ended down 0.8%. Despite similar swings in price, smaller companies fared comparatively better with U.S. midcap stocks only losing 0.5% for the quarter and U.S. small cap stocks only losing 0.1%. In terms of sector performance, nine out of eleven sectors ended the first quarter with losses and despite a late March selloff, technology was still the best overall performer with a 3.5% gain. The worst performing sector was telecommunications which lost 7.5% followed by consumer staples which lost 7.1%. Elsewhere around the globe, developed international markets experienced a 1.4% decline while emerging markets were the only geographic region to produce a positive quarterly result, returning 1.5% over the first three months of the year.
With earnings season right around the corner, we are hopeful that investor attention will return to the fundamentals that underpin the current economic and market environment. With tame inflation, moderate interest rates, a strong global economy and stocks now trading at more attractive valuations, we continue to see upside potential for equities in 2018. Volatility has returned but only to levels that historically would be considered “normal.” Given the recent gyrations in the stock market and the potential for rising interest rates, we encourage investors to re-think the diversification that may or may not be in place within their portfolios. If you would like to learn more about how we are helping clients invest dynamically and consistently with their goals and tolerance for risk, please do not hesitate to speak with your Hennion & Walsh Financial Advisor.
Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion & Walsh cannot guarantee the accuracy of said information and cannot be held liable. This information is provided for informational purposes only and is not a solicitation to buy or sell any of the asset classes or sectors discussed.
Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.
There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions. Distributions from REIT investments are taxed at the owner’s tax bracket.
The prices of small company and mid cap stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.
Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity.
Products that invest in commodities may employ more complex strategies which may expose investors to additional risks.
Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity. Bond Prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the value of your investment.
MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.
MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.
Russell 3000: The Russell 3000 measures the performance of the 3000 largest US companies based on total market capitalization and represents about 98% of the investible US Equity market.
ML BOFA US Corp Mstr [Merill Lynch US Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire US corporate bond market over time.
ML Muni Master [Merill Lynch US Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.
Investors cannot directly purchase any index.
LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.
The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITs that primarily own and operate income-producing real estate.