Weekly Market Commentary May 7, 2018

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Jittery investors and several key economic reports produced big market swings in both directions last week. The S&P 500 dipped 0.2%. The global MSCI ACWI dropped 0.5%, and the Bloomberg BarCap Aggregate Bond Index was unchanged for the second straight week.

Key points for the week

  • Equity performance so far this year is flat, while bonds are down.
  • Unemployment fell to 3.9% in April.
  • Job growth and average hourly earnings’ reports were solid but below estimates.

Performance Update

On a daily basis, the market volatility that emerged at the start of the year continues to be felt. But aside from the daily swings, April was a rather dull month. The S&P 500 rose 0.2%. The MSCI ACWI rose 0.8%, as international developed stocks performed well during the month. The Aggregate Bond Index dropped 0.7% in the face of solid economic numbers. Increasing oil prices buoyed energy stocks and contributed to the weak performance seen in consumer staples, which is often the least volatile sector.

For all the volatility, the market hasn’t moved much from the beginning of the year. The S&P is down 1%, and the MSCI ACWI is down 0.7%. Running to safe investments hasn’t helped. The Aggregate Bond Index is down 2.1%.


Economic News: US Nonfarm Payrolls

The April jobs report demonstrated the overall health of the U.S. economy. Unemployment fell to 3.9%, an 18-year low. The economy generated 164,000 jobs, and hourly earnings rose 2.6%. All three numbers were good but slightly below expectations. Fewer people than expected looked for work in April, pushing the unemployment number lower. Economists had predicted 192,000 jobs, and hourly earnings were expected to rise slightly more than reported.

After initial concerns, the news was viewed positively by most investors. The economy is growing at a healthy rate, and wage data hasn’t shown many signs of worrisome inflation. While the jobs report offered some reassurance inflation is well controlled, we continue to expect it to pick up modestly in the coming months if labor markets remain tight.


Buffett Weekend!

Omaha World-Herald’s Special Section: Berkshire Hathaway Annual Meeting

Berkshire Hathaway just wrapped up its annual meeting in Omaha, and the local paper, the Omaha World-Herald, confined itself to running only two special sections with a couple dozen stories in advance of the meeting. Key topics included where to eat when visiting Omaha, why attending the event is wonderful, and why Warren Buffet is so unique. There wasn’t even one slightly negative story to balance out the positivity. Conspiracy theorists might point out Berkshire Hathaway owns the paper. But, actually, the coverage has always been this positive.


 

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