Market Commentaries

  • Strong Retail Sales Numbers May Push U.S. GDP Above 3% in the Second Quarter


    Market Overview

    Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 05/18/18. Rates and Economic Calendar Data from Bloomberg as of 05/22/18. 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                   

    Developed markets retreated slightly for the week, after seeing gains well above two percent throughout the first 11 days of May. This past week, although faintly negative from a return perspective, was largely dominated by positive news such as U.S. economic activity data and a potential resolution to on-going trade issues between the United States and China. Nonetheless, the S&P 500 Index lost 0.49%, while the Russell Midcap Index gained 0.04% and the Russell 2000 Index, a measure of the Nation’s smallest publically traded firms, gained 1.27%. On the international front, developed markets fell 0.47% last week while emerging markets fell 2.26%. Fixed income markets took notice of the promising economic data previously mentioned, as the yield on the 10 year U.S. Treasury settled at 3.07%, a level that hasn’t been reached since 2011. The U.S. Dollar followed suit, increasing by 1.26% over the course of the week, and nearing its 2018 high.

    As mentioned earlier, the major headlines that dominated this past week’s news cycle were undoubtedly promising in our opinion. Reported figures for U.S retail sales and industrial production during the month of April surprised to the upside in a meaningful way. Out-performance in retail sales, in particular, reinvigorated our confidence in the strength of the U.S. consumer, following a series of reports that indicated the potential for deceleration in consumer spending. This likely indicates that the typical U.S. consumer is beginning to loosen their purse strings as they start to feel the benefits of U.S. income tax cuts. Moreover, the strength of the reported retail sales figures signal that U.S. GDP growth for the second quarter should likely come in above 3%.

    Favorable economic news wasn’t the only noteworthy happening over the past week, as Chinese and U.S. diplomats agreed in principal to bring an end to the on-going trade negotiations between the two nations. Although the specifics haven’t been fully ironed out as of yet, and no concrete agreement currently exists, it appears that the hard-line stance taken by U.S. officials ultimately worked out, as China now sounds willing to make significant concessions. While both sides insist that it was always a “trade dispute”, rather than a “trade war”, investors can breathe easy that whatever it was is coming to an end.

    Although markets have absorbed a 10-year U.S. Treasury Yield near its highest level in seven years with relative ease, and economic activity continues to trend in a positive direction, potential bouts of future volatility still remain. With that said, portfolio diversification becomes increasingly important in 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, timeframe 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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