Markets, Economy

Weekly Kickstart (08/20/2018-08/24/2018)

8/20/18 8:00 AM

iStock-626627280.jpgStocks rallied last week, as the S&P 500 rose by 0.59 percent to 2,850.13. That left the benchmark index up 6.60 percent year-to-date, and just 0.79 percent below the record close. Despite the healthy gain, intraday volatility picked up markedly last week, but this should not be too surprising since the S&P 500 had rallied for five weeks in a row recently, and the CBOE’s VIX index, often referred to as “investors’ fear gauge,” fell this month to the lowest level since January. The last time major indices were near all-time highs and volatility was this low, stocks experienced two consecutive months of sharp declines. Memories of that market tumult during the first quarter are likely still fresh in the minds of many investors, but another reason why 2018 may seem especially volatile is because 2017 was an unusually tranquil period for the market.


Moreover, annualized volatility for the S&P 500 through the first 152 trading days of 2018 was 15.3 percent, right in line with the historical average, and the broad index’s maximum drawdown 2018-to-date is -10.2 percent on a closing basis, smaller than the median intra-year drawdown since 1928 (-13.1 percent). Although such statistics may be reassuring, there are still enough potential near-term headwinds for the markets to keep the day-to-day fluctuations in equity valuations large enough to cause some concern among retail investors. As a result, many of these individuals would likely benefit from working with a professional financial advisor, and encouragingly a lot of them appear open to the idea. For example, a recent study by J.P. Morgan found that not even four in ten surveyed 401(k) plan participants feel highly confident in their ability to make key investment decisions. Sixty-one percent of respondents, though, said that they acknowledge their lack of expertise and therefore prefer to have a professional manage the investments in their retirement account. Another 61 percent even said that “If I could push an “easy” button for retirement and completely hand over my retirement planning and investing to a financial professional, I would.”


To recap a few of the things we learned about the economy last week, the positives included that building permits increased, trade-related inflation pressures moderated, capacity utilization remained elevated, retail sales jumped, small business owner optimism rose to a near-record high, nonfarm productivity surged, and first-time claims for unemployment benefits slid to a roughly half-century low. As for the negatives, consumer confidence softened, mortgage applications fell, housing starts rebounded by less than expected, homebuilder sentiment deteriorated, industrial production growth cooled, and gauges of regional manufacturing activity continued to send mixed signals. This week the pace of economic data slows down even further but there are still a few important reports on housing and manufacturing scheduled to be released, along with the potentially market-moving minutes from the last Federal Open Market Committee (FOMC) meeting due out on Wednesday.


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

What To Watch:



  • Nothing significant 






Sources: Econoday, Pension Partners, Twitter, J.P. Morgan, FRBSL

Post author: Charles Couch