U.S. large-cap stocks finished lower on the week, their first weekly decline since the end of June. Weighing on stocks were worries of financial and currency turmoil in Turkey as well as continued tariff announcements between the U.S. and China. We continue to believe most of the threats to raise tariffs are negotiation postures and will be resolved over time without a significant slowdown in global growth. But the current increases have hurt some severely. Remember that even if additional higher tariffs are imposed and may be painful, companies and consumers will likely react quickly and adjust to the new environment.
Stocks Nearly Back to Record Highs -- What Now?
At one point last week, the U.S. stock market had climbed to within half a percent of its all-time high set back in late January. In that period, stocks endured a sharp correction – falling 10.2% -- while grinding higher through the summer to get back near their high-water mark.
Plenty of forces have been at play of late. Political turmoil, global trade spats, and worries over rising interest rates have spurred sell-offs, while healthy economic readings and record corporate profits have led the rallies. With the market having nearly recovered all of its correction losses, it's a good time to put performance in perspective as we look ahead to what may be in store over the balance of the year.
Sources: 1. Bloomberg. 2. Morningstar Direct. Stocks represented by the total return of the S&P 500 Index. 3. Factset Earnings Insight.
Craig Fehr, CFA
The Stock & Bond Market
|Dow Jones Industrial Average||25,313||-0.6%||2.4%|
|S&P 500 Index||2,833||-0.2%||6.0%|
|10-yr Treasury Yield||2.87%||-0.08%||0.47%|
Source: Bloomberg, 08/10/18. Bonds represented by the iShares Core U.S. Aggregate Bond ETF. Past performance does not guarantee future results.
The Week Ahead
The Weekly Market Update is published every Friday, after U.S. markets close.
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