Weekly Market Drivers | LPL Financial Research

Markets Hiccup as Trade Negotiations Escalate

US: S&P 500 Index -2.2%, Dow -2.1%, Nasdaq -3.0%
Europe: STOXX Europe 600 -3.4%, German DAX -2.84% France CAC 40 -3.99%, U.K. FTSE 100 -2.4%
Asia: Japan Nikkei -4.1, China Shanghai Composite -4.5, Korea KOSPI -4.0%
Rates/Commodities: 10-Year Treasury yield -9 basis points to 2.47%, WTI crude oil -0.5%, COMEX gold: +0.4%

Markets encountered their first bout of volatility in 2019 after the U.S. announced it would increase tariffs from 10% to 25% on $200 billion of Chinese imports. The developments renewed concerns of slowing global growth, as a resolution to the ongoing trade conflict was expected to be a positive catalyst for business confidence and consumer spending.

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Compounding Interest: The 8th Wonder Of The World

“Compounding interest is the eighth wonder of the world.” Albert Einstein

When should you start investing? Yesterday is one of the best answers we can think of. As Einstein stated in his quote, compounding interest can be extremely powerful for investors over time. Compounding interest essentially means “interest on interest,” and it’s why so many long-term investors have been successful.

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Market Update: Fri, May 10, 2019 | LPL Financial Research

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Daily Insights

Higher tariffs. Trade negotiations broke down yet again this week, with the U.S. and China failing to find common ground in this week’s talks. The U.S. will increase tariffs on $200 billion in Chinese imports, and officials threatened higher levies on another $325 billion of goods. Talks will reportedly resume today. Continue reading

Earnings Estimates Stand Firm

Earnings growth projections have remained positive globally, even as trade tensions have rattled financial markets this week.

Lately, headlines on the U.S.-China trade dispute have distracted investors, and a few pockets of the global economy have weakened over the last several months. Fixed income markets have positioned for a marked economic slowdown with the yield curve again nearing inversion (long-term rates falling below short-term rates).

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Market Update: Thurs, May 9, 2019 | LPL Financial Research

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Daily Insights

Chinese negotiators arrive in the U.S. Time is running out to avert the tariff increases slated to go into effect tonight (though actual implementation takes weeks, leaving more time for negotiations). The arrival of China’s chief negotiator in Washington today can be logically seen as a positive sign. Continue reading

Uncomfortable, but Expected

Trade tensions have flared up again, and they’ve caught the stock market off guard.

The S&P 500 Index has dropped 2.1% over the past two days amid a slew of trade-related headlines. On May 6, the United States announced it would implement additional tariffs on Chinese imports at the end of the week if no trade agreement is reached. In response, China threatened its own retaliatory measures. China and U.S. officials are still scheduled to continue trade talks in Washington, D.C. May 9, but the threat of escalation looms large in investors’ minds.

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Market Update: Wed, May 8, 2019 | LPL Financial Research

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Daily Insights

U.S. stocks fall further. Yesterday, the S&P 500 Index posted its worst day since January 3 as investors sorted through the implications of additional U.S. and Chinese tariffs. The recent equity market volatility, though unpleasant, is consistent with our expectations given our switch to a market weight allocation seven weeks ago. Continue reading

Rising Tide for Diversified Portfolios

Diversified investors were the big winners in the first four months of this year.

As shown in the LPL Chart of the Day, both stocks and bonds have posted strong rallies through the first four months of this year, thanks to increased risk appetite and global demand for U.S. debt. The S&P 500 Index rose 17.5% through April, its best start to a year since 1987, while the Bloomberg Barclays U.S. Aggregate Index (the Agg) climbed 3%, its best start since 2016.

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