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Markets Increase - Then Fall Again

Markets were closed on March 30 for Good Friday, but in the four days of trading, stocks recovered some of this year’s losses.[i] For the week, the S&P 500 added 2.09%, the Dow gained 2.67%, and the NASDAQ increased by 1.03%.[ii] International stocks in the MSCI EAFE grew 0.81%.[iii] However, on Monday the markets fell again with the S&P down 2.23% on the day. As we have written since early February, we expected a return of volatility after a prolonged period of calm markets around the world. Overall, economic growth in the U.S. remains strong and we expect good earnings for the first quarter which could help the markets recover from the recent lows. But we shall see.

Last week also marked the end of the year’s 1st quarter. Our next market update will share a recap of key performance details and events from January through March.

In this report, we will consider findings from last week and offer some perspective on the data.

What We Learned Last Week

1. The Economy Expanded More Than Thought
We received the final reading of 4th quarter 2017 Gross Domestic Product (GDP), and the numbers were higher than expected. Between October and December last year, GDP grew at a 2.9% annualized rate. In particular, consumer spending contributed significantly to our economic growth.[iv]

2. Consumers Remained Confident

Consumer Sentiment readings reached a 14-year high in March and may be a sign that spending was also on the rise last month.[v] Meanwhile, the Consumer Confidence report showed slightly lower readings than in February but continued to stay high. Though respondents’ confidence in the stock market wavered, their strong assessments of the labor market helped maintain solid numbers.[vi] We do believe that further stock market turmoil could lead the overall confidence numbers lower.

3. Personal Incomes Rose

Personal income grew 0.4% in February and has increased 3.7% over the past 12 months. Consumers also spent more money, and data on personal debt and financial obligations indicates that they still have more room to spend.[vii]

The Takeaway

Examined together, this data seems to indicate that consumers are confident about the economy and their job prospects—and are continuing to earn and spend more.

Considering that approximately 69% of the U.S. economy comes from consumer spending, these developments should be positive news and hopefully propel stock prices higher.[viii]

That said, every market environment has risks, and no economy is perfect. We are here to help you navigate your finances and make sense of developing news. If you have any questions, contact us any time.

ECONOMIC CALENDAR
Monday: PMI Manufacturing Index, ISM Mfg Index, Construction Spending
Tuesday: Motor Vehicle Sales
Wednesday: ADP Employment Report, Factory Orders, ISM Non-Mfg Index
Thursday: Jobless Claims
Friday: Employment Situation

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices and Treasury.gov. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
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[i] https://www.cnbc.com/2018/03/29/us-stock-futures-dow-data-tech-and-politics-on-the-agenda.html

[ii] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[iii] https://www.msci.com/end-of-day-data-search

[iv] http://wsj-us.econoday.com/byshoweventfull.asp?fid=485677&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[v] http://wsj-us.econoday.com/byshoweventfull.asp?fid=485847&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[vi] http://wsj-us.econoday.com/byshoweventfull.asp?fid=485916&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[vii] https://www.ftportfolios.com/Commentary/EconomicResearch/2018/3/29/personal-income-rose-0.4percent-in-february

[viii] https://www.thebalance.com/consumer-spending-trends-and-current-statistics-3305916

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All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

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