Today marks the 10th anniversary of the failure of the Wall Street firm Bear Stearns, widely considered the opening act of the great financial crisis of 2008. Bear was done in, so the story goes, by a mix of ill-considered bets on mortgage securities and excessive borrowing.
I woke up this morning to a surprise. It had snowed, which was expected. After all the fear-mongering coverage, in fact, I expected the house to be covered, but it wasn’t so bad. The real surprise was the fact that a combination of wind and heavy snow had taken down several trees—including an 18-footer right across most of my driveway. All of a sudden, I was cut off.
Yesterday, I wrote that the markets were likely to continue to trend upward, on the idea that the U.S. tariffs were not really going to happen. But then the news that Gary Cohn had resigned as head of the National Economic Council was announced—and this has changed that perception entirely.
Brad McMillan, Commonwealth’s CIO, recaps the economic news for February. Last month, there was a 10-percent market drawdown in the U.S., something we haven’t seen for almost two years. Although many were worried that this was the “big one,” the markets recovered more than half of their losses by month-end, and the economic fundamentals remain sound. Job growth is strong, business confidence is high, and consumer confidence is at the highest level since 2000. Will this good news continue into March? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Yesterday, President Trump announced that the U.S. will be imposing tariffs on steel and aluminum imports. This shocked markets here in the U.S. and around the world, driving them back down just as it looked like they were recovering from the downturn last month. What happened? And is this a more serious threat going forward? In a word, yes.
2017 brought economic expansion and record markets that were largely unexpected. As we approach the New Year, many are left wondering if that growth will continue, or if our business cycle has hit its peak. In the attached white paper, Brad McMillan, Commonwealth’s chief investment officer, looks at where we currently stand, what will determine the direction of the markets and economy, and where we’re headed in 2018.
With the declines yesterday, U.S. markets are now in an official correction. Just to get the terminology straight, a “correction” means a 10-percent decline, while a "bear market" indicates a 20-percent decline. As of the close yesterday, the Dow was down 10.3 percent, and the S&P 500 was down 10.1 percent.
Today’s big news is the jobs report. It is the single most informative and important economic report there is. As such, it always gets a great deal of attention. In general, the news this month is quite good—but not perfect.
Brad McMillan, Commonwealth’s CIO, recaps another great month for the markets. In January, all three U.S. indices were up by at least 5 percent, as were international markets. There was a bit of a pullback at the end of the month, as interest rates moved up to levels we haven’t seen in years. Indeed, fixed income took a bit of a hit on these higher rates. Still, consumers keep spending and businesses are investing. Will this “virtuous circle” lead to continued economic growth? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
There is a market adage that states, “as goes January, so goes the year.” We certainly should hope this is the case for 2018, as January was another month of great stock market returns. The U.S. indices were up by 5 percent or more, while international markets—both developed and emerging—did the same.