September Economic Update
Market Summary
Wall Street had much to celebrate in August as the S&P 500 and Nasdaq both reached new all-time highs. U.S. stock exchanges outperformed many others around the world, as imposed tariffs and currency troubles in the emerging markets gave overseas investors pause. U.S. economic indicators have maintained their strength with one of the few exceptions being the housing sector. (1)
With last month’s gains, the current “bull market” made history by becoming the longest on record (over nine years and counting). This means that since the market lows back in March of 2009, we have not had more than a 20% pull back. We have experienced four “corrections” which are defined as market retreats of 10% or more, the last of which happened back in January of this year. The previous longest bull market was in the 1990s. (2)
U.S. Economic Developments
Overall, fundamental economic indicators remain strong including consumer confidence and spending, payrolls, employment, and GDP. Yearly inflation continued to rise which is typically a side effect of a strong economy. The July Consumer Price Index measured inflation at 2.9%, the highest number seen since February 2012.
Trade tensions remain, but the markets shrugged off concerns for another month. As August ended, the White House was trying to forge a new multi-national trade deal to replace NAFTA. Mexico and the U.S. tentatively agreed to a new trade pact that would increase wages for Mexico’s workers, keep Mexican agricultural exports free from U.S. import taxes, and require 75% of the value of vehicles sold in North America to be produced in America, Canada, or Mexico. Negotiations between the U.S. and Canada are set to continue this month. (3,4)
Real Estate
The home buying slump continued in August as The National Association of Realtors reported existing home sales fell 0.7% in July which continued the downward trend from June when it slipped 0.6%. Housing has become unaffordable for some with home values have increasing by 6.3% in the past 12 months (reported by the 20-city S&P Case-Shiller index). (5,6)
Can This Market Keep Going?
With a new bull record and the markets near all-time highs, should you marvel at such achievements? Or should you maintain skepticism – or even worry about what may lie ahead? If you are an experienced investor, you probably already do all three. Ultimately, the expiration date for this amazing bull run is anyone’s guess and cautious optimism is typically the best approach. An abrupt Wall Street downturn might seem improbable at the moment, but a nine-and-a-half-year-old bull market that suddenly propels stocks to new record peaks also qualifies as an improbability. At the end of the day, what really matters is having a well-thought out strategy and managing your risk.
Monthly Financial Tip:
Retirement plans should be updated with time. As your financial situation changes, your plan should change and evolve.
Citations
1 - seattletimes.com/business/what-to-do-with-the-market-back-at-record-highs/ [9/1/18] 2 - https://seekingalpha.com/article/4203840-u-s-stock-market-even-longest-bull-market-last-forever 3 - reuters.com/article/us-trade-nafta-factbox/winners-and-losers-from-the-new-nafta-deal-idUSKCN1LF2O9 [8/30/18] 4 - chicagotribune.com/news/nationworld/politics/ct-trump-canada-nafta-20180831-story.html [8/31/18] 5 - investing.com/economic-calendar/ [8/31/18] 6 - tradingeconomics.com/united-states/existing-home-sales
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
