Broker Check

3rd Quarter Investment and Financial Planning Newsletter

July 12, 2018

At the beginning of each quarter, we like to review the factors that influenced the financial markets during the previous months of the calendar year and look ahead to what we can expect in the coming months.

A look back at the 1st half of 2018

 During the 1st quarter of 2018 Major domestic indexes hit new records in January then slipped into corrections in February. By March's end, they recovered somewhat from February's lows, but the S&P 500 and Dow still posted their first quarterly losses in more than 2 years. Things improved during the 2nd quarter as the S&P 500 ended up 1.67% year to date (as of 6/29/2018) and the Dow ended down 1.81% since beginning of the year but rose over 2.5% for the 2nd quarter. The U.S. economy remains strong thanks to low unemployment numbers and strong corporate earnings.[i] At the end of last month, the Fed announced that all but one bank passed stress tests evaluating their ability to weather a financial downturn.[ii]

 The International markets have been a different story as trade concerns continued to create uncertainty in markets around the world this year. International markets are down 4.49%. (1/1/2018 – 6/29/2018) President Trump maintains that China and other countries have consistently practiced unfair trade tactics and imposed large tariffs on U.S. exports.[iii] In response, the White House has proposed raising tariffs on imports from China, Canada, and other countries. (Click on the link below this paragraph to learn what these tariff’s may mean for the markets)

What raising tariffs means for markets

 Unfair trade practices take several forms. In one scenario, foreign governments subsidize companies that export products. Those companies may in turn sell their products in the U.S. below cost. This approach can harm U.S. companies, cost jobs, and ultimately damage the economy.[iv] The President also argues that imported metals are a threat to national security.[v]

 Looking ahead for rest of 2018

 We are currently in the second longest bull market in U.S. history. Equity valuations are at high levels, bond spreads are tight, and some feel the markets are priced to perfection. Investors have been grappling with how to interpret positive news coming from labor markets, economic surveys and equity markets for some time. The upbeat economic indicators reflect many positives. Yet enough uncertainty persists for us to pause and ask, is good news truly good news or is it actually bad news? Can markets and economies continue to grow or is this as good as it gets. 

 Read the rest of the 2018 market outlook by clicking here

 What this means for you and your financial portfolio

 Part of our job is to stress the importance of being comfortable with your portfolio and help you accumulate wealth without taking on undue risk. Markets rise, and markets fall, but unless there have been changes in your circumstances or you’re coming up on a milestone in your life such as retirement, stay with the plan. By itself, a long run in stocks isn't a good reason to bail out of the market. With all the volatility in the market, we can't stress the importance of diversification enough.

As details continue unfolding, we’ll be sure to keep our pulse on what lies ahead in the markets.  In the meantime, please contact us to let us know if major changes have happened or are about to happen in your life. We want to make sure we are meeting our clients' expectations and part of that is making sure their financial portfolio and risk tolerance matches up with their goals.  


David Hanson & Carl Hanson, CFP®