Weekly Market Commentary March 11, 2019

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The S&P 500 finally experienced a meaningful decline after posting gains nearly every week this year. The index dropped 2.2% last week.

Key news items raised questions about the health of the global economy. The number of new U.S. jobs created missed expectations by a wide margin, and the European Central Bank (ECB) slashed its growth expectations for 2019. Global trade data provided additional evidence of a slowing global economy, and key Brexit participants downplayed odds of a summit to ratify a deal in later March. The combination was more than stocks could withstand.

The global MSCI ACWI shed 2.1%. Bonds climbed on hopes the weakening economy would push rates lower. The Bloomberg BarCap Aggregate Bond Index climbed 0.7%.

Key Points for the Week

  • Last week was the 10th anniversary of the stock market hitting bottom during the financial crisis.
  • The U.S. economy created 20,000 new jobs, missing estimates by a wide margin.
  • U.S. stocks finally dropped after a sharp run-up in markets.

Market Analysis

Last week, we celebrated the 10-year anniversary of the stock market hitting bottom during the financial crisis. Since that time, the S&P 500 has climbed more than 17% per year and nearly 400% in total.

Staying balanced has been key for investors during this long run of performance. Over the last decade, a regular stream of concerns and worries has threatened to send the market lower. The concerns actually contributed to the market’s growth as strong vigilance on risk helps avoid the excesses that often derail strong markets.

Weaker economic news from across the globe is the latest concern for investors. The most surprising sign of weakness was the U.S. employment report, which showed only 20,000 new jobs were created compared to expectations of 180,000.

The ECB lowered its 2019 growth estimate from 1.7% to 1.1%. Because of the revised estimate, it took steps to encourage bank lending. China’s trade data added to the unease. Exports dropped 20.7%, and imports slid 5.2%. Large declines were expected as the long Lunar New Year holiday traditionally cuts into economic activity, but the poor data underperformed expectations.

However, the last 10 years serve as a reminder for us to acknowledge bad news but to remain aware of good news and the ability of capitalism to overcome challenges. There was some good news in the labor report. Average hourly earnings rose 3.4%, meaning the average worker is receiving pay increases above the rate of inflation. An alternative estimate of employment showed employment increased by more than 200,000 in February.

The risks of a slowing economy are real and worth watching carefully. Investors should regularly remind themselves concerns like this one have been with us since 2009. A long-term focus can help put today’s risks in proper perspective.


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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. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. 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

https://www.wsj.com/articles/u-s-economy-grew-2-6-in-the-fourth-quarter-11551360960

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