Markets, Economy

Weekly Kickstart (06/25/2018-06/29/2018)

6/25/18 8:00 AM

IMAGEStocks were under pressure last week, as the S&P 500 fell by 0.89 percent to 2,754.88. That small loss still left the benchmark index up 3.04 percent 2018-to-date, and just 4.11 percent below the record close hit earlier this year. Some major indices have fared even better recently, such as the Russell 2000 which hit a new all-time high last week and ended Friday up 9.77 percent YTD. A big factor behind that outperformance is the composition of the index, i.e. the Russell 2000 is made up primarily of small- and mid-cap stocks, while the companies listed on the S&P 500 are much larger. That matters because smaller businesses usually derive most of their profits domestically, whereas very large companies often sell a lot of goods and services overseas.

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Moreover, recent trade war concerns have weighed heavily on multinational companies that generate a big percentage of their revenues abroad, while at the same time benefited smaller, U.S.-focused businesses with less exposure to tariffs and foreign exchanges rates. Whether the outperformance of small-cap stocks persists remains unknown and it could hinge on how quickly a deal is worked out between the U.S. and other countries. There is also the risk that the usefulness of smaller firms as a safe-haven will diminish if a full-scale trade war becomes unavoidable and intensifies to the point where it begins to drag on U.S. economic growth. All of this means that volatility could stay elevated in the near-term, which is why regular investors should continue to focus less on the day-to-day fluctuations in the market and more on the long-term goal of amassing a large retirement nest egg. Assistance with that endeavor is available through the consistent use of tax-advantaged savings vehicles, dollar-cost averaging, and regularly consulting with a professional financial advisor. As always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that mortgage and refinance applications rose, housing starts jumped, and first-time claims for unemployment benefits held near a half-century low. As for the negatives, existing home sales declined, building authorizations fell, homebuilder optimism cooled, and manufacturing activity in the Mid-Atlantic region of the country moderated. This week the pace of economic data picks up with several important reports on housing, manufacturing, consumers, and inflation scheduled to be released.

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**A more detailed snapshot of the U.S. economy can be found here.**

What To Watch:

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Sources: Econoday, FRBSL

Post author: Charles Couch

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