Markets went for another wild ride last week, as major domestic indexes swung back and forth. By Friday, December 7, markets had posted their worst weekly performance since March—and the S&P 500 and Dow both moved into negative territory for 2018.[i]
Let’s take a look at what is driving this challenging market performance.
Examining Recent Volatility
- How volatile are stocks right now?
If recent market fluctuations have felt intense to you, there’s a reason: They are. The past three weeks have had the most volatility since 2008’s financial crisis. During this time, domestic indexes have ricocheted between gains and losses. The large swings have occurred both week-to-week and within daily trading.[ii]
- What is causing the volatility?
Many of the same themes we’ve discussed throughout 2018 are continuing to affect market behavior. Ultimately, many investors are worried that corporate profits and global growth will suffer if trade tension persists and the Federal Reserve continues raising interest rates.[iii]
Concerns about Treasury yields were also on investors’ minds. For part of last week, 3-year Treasury notes had higher yields than 5-year notes. Called an inversion, a higher yield on shorter-term Treasuries can be a sign of a coming recession. The yield spread between 2-year and 10-year Treasury notes, which people focus on more, has not inverted.[iv]
- Should you feel concerned?
With many headlines to digest, from conspiracy charges against a Chinese tech leader to comments from the Fed, investors had a lot to consider last week.[v] The difference is how they reacted to this information. For some time, markets were basically ignoring headlines. Now, they’ve moved in the opposite direction into what one investment manager called “a period of hypersensitivity.”[vi]
Consequently, recent market performance may seem unnerving. As is often the case, however, the reality may be less extreme than what appears at first glance, especially when you look at the fundamentals.
- What do the fundamentals tell us?
While last week’s market performance saw large fluctuations, the fundamentals we received were far less dramatic. We learned that two sectors beat expectations in November: manufacturing and service.[vii] Further, the November labor report revealed fewer new jobs than anticipated, but unemployment is still at historically low levels, as job and wage growth continue.[viii] Consumer confidence remains high which we hope will continue to fuel the economy’s growth through retail spending.
Remember, risks always exist in the markets and economy, and we’re analyzing these details closely. If you have any questions about your financial standing or anything you hear in the news, we are here to talk.
Thursday: Jobless Claims
Friday: Retail Sales, Industrial Production
IronGate Partners is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.
This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.
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.
This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.