U.S. Stocks Finish the Week Higher Despite Geopolitical Concerns05-29-2018 |
Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 05/25/18. Rates and Economic Calendar Data from Bloomberg as of 05/29/18. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.
U.S. equities fluctuated in the week leading up to the Memorial Day weekend. However, the major averages were still able to finish the week in positive territory. The technology-heavy NASDAQ index led the way returning 1.09% for the week followed by the S&P 500 Index and the Dow Jones Industrial Average, which posted gains of 0.33% and 0.18% respectively. On the other hand, the 10 year U.S. Treasury yield fell back below the 3% mark to end the week at 2.93%. It would appear that geopolitical concerns and the general “risk off” sentiment of last week brought in the buyers and drove bond prices back up, and their associated yields back down, to their current levels.
On the other side of the world, we saw some weakness in the Euro zone last week reflected by a 1.51% drop in the MSCI EAFE Index, which is heavily weighted towards developed European countries. Despite the sell-off, our outlook for the year remains positive for the region in part due to falling unemployment, high levels of consumer confidence, increasing wage growth and an accommodative central bank.
Turning our focus back to the U.S., while economic data continues to look healthy, the markets continue to react to geopolitical updates and headline risks. Just last week we saw markets push higher following a release by the U.S. Treasury Secretary that indicated that the “trade war” between the U.S. and China had been put on hold…only to be reversed as President Trump tempered those expectations later in the week. Lingering trade war concerns have apparently spilled into the shortened trading session this week as well. Markets opened lower on Monday with geopolitical angst coming this time from overseas – Italy in particular. It will be a busy week of domestic data releases and we look forward to reviewing hard numbers, and not speculative rhetoric, in addition to assessing the on-going developments in Italy.
Despite on-going uncertainties over trade, tariffs, or even potential summits with other foreign leaders, investors would be wise to remember to keep in mind that the global economic foundation remains relatively strong at this point in time. Short bouts of market volatility can be expected as we move forward but should not necessarily scare off investors, absent a more substantial market or geopolitical event, and could even lead to potential buying opportunities in certain areas as appropriate. That being 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.
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.
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