Markets reversed the prior week’s selloff to end the quarter on a positive note. The S&P 500 rose 2.1% last week. The global MSCI ACWI climbed 1.3%, and the Bloomberg BarCap Aggregate Bond Index gained 0.5%. In spite of the positive week, all three indices finished lower in the first quarter. The S&P 500 eased 1.2% lower. The MSCI ACWI dropped 1.4%, and the Aggregate Bond Index fell 1.5%.
Stocks rallied as investors became less concerned about protectionist risk. Trade negotiations with South Korea suggested the Trump administration’s rhetoric will be balanced by an openness to negotiating deals that contain only modest changes to existing agreements. Reports of trade negotiations between the U.S. and China also boosted markets.
Key points for the week
- Stocks rallied as protectionist concerns diminished.
- Stocks declined slightly in the first quarter.
- Consumer income and spending continue to grow at a healthy pace.
Most markets finished lower during the quarter. While all three of the indices we track fell, the end result was a very modest decline between 1.2% and 1.5%. The quarter was volatile, but a net decline of less than 2% is a normal part of investing.
Technology and consumer discretionary stocks were the only two sectors that finished higher. Stocks more sensitive to changes in interest rates, such as utilities, real estate, and telecommunications, lagged. Growth stocks performed very well, and emerging market stocks rallied, helping to offset weakness in other international markets.
Bonds failed to provide investors any cushion during the quarter. As inflation moved up the list of investor concerns, bond prices dropped and underperformed stocks. If inflation remains a concern, the diversification benefit of bonds will likely be lower than in past years. We continue to watch fixed-income markets closely for the best opportunities to diversify portfolios.
U.S. consumers continue to post healthy gains in income, according to data released last week. Personal income rose at a reasonable pace, climbing 0.4% for the third straight month. Spending trailed off in February after rising at an annualized pace of 4% in the fourth quarter. The slight pause in spending may push first quarter GDP below 2%,
The decline in spending provides evidence consumers are avoiding the excesses seen in the 2008 financial crisis. After the spending spree in the fourth quarter of 2017, consumers chose to boost their savings and debt payments in early 2018. A prudent consumer provides a healthy base for an ongoing recovery that benefits workers and corporations.
Fun story of the week
“Roseanne” returned to the airwaves after a 20-year hiatus. Politics and cultural issues are expected to be frequent themes this season. Roseanne is an avowed Trump supporter in the show — so there is now at least one political show on television that’s meant to be funny.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.