September 2018 Economic Update

In this month’s blog, I’ll discuss some of the major headlines that influenced markets in August. I will also provide insight into what these developments could mean for you as an investor.

U.S. stocks celebrated a major milestone in August. On the 22^nd, our current bull market officially became the longest in U.S. history. At over 3,400 days old—or more than 9 years—we have never gone this long without a bear market.[i]

By month’s end, domestic indexes had recorded their best August performances in years. The S&P 500 increased by 3%, and the Dow added 2.1%. Both had their largest August gains since 2014. The NASDAQ did even better, growing by more than 5.7%. That increase was its best August since 2000.[ii]

Throughout the month, trade tension remained—as has been the case for much of 2018.[iii] The U.S. and China failed to reach any real breakthroughs in their ongoing trade skirmishes.[iv] Meanwhile, renegotiating the North American Free Trade Agreement (NAFTA) did make some progress, as the U.S. and Mexico announced a new trade agreement. However, talks with Canada—NAFTA’s 3^rd member—didn’t reach any resolution. As August ended, the future of NAFTA remained unknown.[v]

In addition to trade, concerns about Turkey’s plummeting currency also captured investors’ attention. During August, the lira hit its lowest point ever compared to the U.S. dollar.[vi] The currency’s value has dropped as inflation spiked to its highest point since 2003. Some analysts worry that Turkey’s economic problems could spread to other countries.[vii] It’s not likely to spread, though. Turkey has a relatively small economy and still has opportunities to help relieve its spiraling inflation.[viii]

So, between trade tension and emerging market concerns—not to mention geopolitical drama—why did markets perform so well in August? The U.S. economy continues to show that it is in good condition.

For example, August brought the 2^nd publication of Gross Domestic Product (GDP) between April and June. The data indicated the economy grew even faster than originally measured.[ix] The labor market also stayed strong in August as unemployment numbers approach lows not seen in decades.[x] In addition, business investment spending showed positive data, and one measure of small- to mid-size organizations’ sentiments hit its highest point in 35 years.[xi] Perhaps unsurprisingly, given this confluence of data, consumers are also feeling good. Consumer confidence reached its highest reading since 2000.[xii]

Of course, market risks remain, and we will continue to follow many factors in the coming months. From emerging markets’ health to domestic political developments, we have a number of details to monitor as related to market performance.

That’s it for this month’s educational economic update.

Once again, this is Dr. John Colegrove with Calder & Colegrove Investment Group signing off for the month of September 2018.

Please remember that nothing we talk about here is a recommendation. If you would like to discuss your personal financial situation, please give us a call at 678-482-0686. We’d be happy to talk to you.

Required Disclosure

While we believe the information in this report is reliable, we cannot guarantee its accuracy. Opinions expressed are subject to change without notice and are not intended as investment advice or a solicitation for the purchase or sale of any security. Please consult your financial professional before making any investment decision.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining markets. The indices mentioned are unmanaged and cannot be invested into directly. Past performance does not guarantee future results.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

[i] https://money.cnn.com/2018/08/22/investing/bull-market-longest-stocks/index.html

[ii] https://www.cnbc.com/2018/08/31/us-markets-global-trade-tensions-ramp-up.html

[iii] https://am.jpmorgan.com/gb/en/asset-management/gim/adv/insights/market-insights-monthly-market-review-august-2018

[iv] https://www.cnbc.com/2018/08/24/us-stocks-china-trade-talks-end-powell-to-speak-at-jackson-hole.html

[v] https://www.reuters.com/article/us-usa-stocks/wall-street-mixed-as-u-s-canada-trade-talks-end-idUSKCN1LG1IU

[vi] https://www.cnbc.com/2018/08/17/us-markets-china-us-trade-developments-earnings-data-on-the-agenda.html

[vii] https://www.bloomberg.com/news/articles/2018-09-02/turkey-to-set-tone-again-for-emerging-markets-after-august-pain

[viii] https://lplresearch.com/2018/08/16/market-update-thursday-august-16-2018/

[ix] https://www.bloomberg.com/news/articles/2018-08-29/u-s-second-quarter-growth-revised-up-to-4-2-on-software-trade

[x] https://www.cnbc.com/2018/08/23/us-weekly-jobless-claims-aug-18-2018.html

[xi] https://am.jpmorgan.com/gb/en/asset-management/gim/adv/insights/market-insights-monthly-market-review-august-2018

[xii] https://www.marketwatch.com/story/consumer-confidence-soars-to-18-year-high-2018-08-28

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