Weekly market update
The major averages finished the week mixed with the Dow and S&P 500 finishing in positive territory (2.2% and 0.86% respectively), but the NASDAQ and the Russell 2000 once again finished lower (-0.28% and -0.53%). In light of the simmering trade war, rising rates, international discord, strengthening dollar and rising oil prices—high-dividend “safety” stocks are leading U.S. stock indexes latest assault on record highs, the most recent sign of how a nine-year-long market rally is reshaping longstanding investor behaviors.
This month, the biggest gainers in the S&P 500 include firms focusing on telecommunications services, consumer staples and utilities—so-called safe sectors whose steady dividend payouts have long made them investor favorites when markets are volatile or declining. These shares typically lag behind major indexes during rallies, in part because they are perceived to offer limited potential gains.
The economic news last week was not as encouraging as it has been as of late. The housing market continues to suffer thanks to a lack of supply and rising rates. Housing starts were a bit better than expected, but building permits plunged, signaling trouble ahead for homebuilders.
First-time unemployment claims continue to fall to multi-decade lows; in fact, you would have to go back to 1969 to find lower numbers—I was 3 years old.
Across the ponds, European and Asian markets had their best week in some time as investors shrugged off the trade concerns and the dollar lost a bit of ground to other currencies. The trade concerns still exist, but China is looking at taking measures to stimulate their economy and that helped lift Asian shares.
This week, trade concerns are back in the headlines as a fresh new round of tariffs were announced between China and the U.S., so we’ll see how investors react—whether they will keep hitting the buy button or take a little profit. It is FED week and the Federal Reserve is expected to raise rates once again, making it the third hike this year. Most importantly will be the FED’s comments on the state of the economy, how many more hikes to expect and the impact of trade wars. We’ll have to wait until later in the week before we get the meat of the economic data and when we’ll get the latest read on personal income, spending and inflation. So stay tuned and we’ll keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
September 24, 2018
