Market Commentaries

  • Heightened Trade Concerns Constrain Markets


    Market Overview

    Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 06/22/18. Rates and Economic Calendar Data from Bloomberg as of 06/25/18. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.

    Happening Now                   

    Over the past week global stock markets took a few steps back despite housing starts hitting an 11-year high, the expectation for lower oil prices due to an agreement among members of OPEC to reduce output, and the anticipation of further surprises to the upside as it relates to the release of productivity data over the coming week. Nonetheless, the S&P 500 Index retreated to a level of 2,775, representing a decline of 0.87%, while the Russell Mid-cap Index lost 0.62%. The Russell 2000 Index, a measure of the Nation’s smallest publicly traded firms, stood alone as it gained 0.11%; an indication that on-going trade disputes (Ex. China) are likely to blame for the broad based losses that investors experienced over the past week. In this regard, it is important to remember that small cap companies derive the majority of their revenues domestically, and are thus less sensitive to global happenings. On the international equities front, developed markets fell 0.96% last week while emerging markets declined by 2.27%. Finally, the 10 year U.S. Treasury yield declined modestly and settled at 2.90%, while the U.S. Dollar held flat for the week.

    As you may recall, our global economic outlook for 2018 has called for synchronized global growth with the U.S. slightly outpacing the rest of the pack. Our thesis has not changed. In fact, in our view, it has been continually reinforced. The global consumer has undoubtedly experienced a reawakening as data on global consumer spending continues to impress. Capital expenditures, an area that was once a faint area of concern, appears to have bucked the trend and is beginning to show strength. Confidence among global business leaders has reached peak levels and global interest rate levels remain accommodative. In our view, these highlights give credence to the fact that the global economic growth story is in fact alive and well.

    The thousand pound albatross that has weighed on the market’s reaction to the overabundance of positive economic data just mentioned has been the escalating trade dispute between the U.S. and China. Both sides have shown an unwillingness to back down, as each threatens to increase the level of imports that tariffs would be applied to. As far as we’re concerned these disputes have been nothing more than noise; a distraction from continued strength in underlying macroeconomic factors.

    Although we believe that current concerns surrounding trade disputes are likely to be resolved over the short term, and that the underlying economic fundamentals speak volumes about the strength of the global economy, downside risks and economic uncertainties still remain. With that said, portfolio diversification becomes increasingly important during times of heightened uncertainty, and we encourage investors to revisit the diversification that may, or may not, be in place within their existing portfolios. If you would like to learn more about how we are helping clients invest dynamically and consistently with their own goals, time-frame 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.

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