How can markets hold up despite geopolitical concerns?

Posted by | August 22, 2017 | Newsletters | No Comments
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From domestic unrest to international terrorism, last week provided many headlines that could easily rattle the markets. While we did see days with volatility and declines, the major indexes remained relatively flat.1 For the week, the Dow was down 0.84%, the S&P 500 dropped 0.65%, and the NASDAQ fell 0.64%.2 On the international front, the MSCI EAFE remained virtually the same last week as the week before, recording a microscopic 0.0014% increase.3

Why didn’t the markets react to the geopolitical turmoil by turning sharply negative? As we’ve shared before: Headlines shouldn’t drive long-term market behavior—economic fundamentals should. Last week, we received reports indicating the economy continues to be strong in a number of areas.

Here is a closer look at last week’s important economic news:

Robust Retail Sales

July retail sales rose 0.6%, beating expectations and showing strength in a variety of retail categories.4

Strong Business Inventories

Factory, warehouse, and retail business inventories all jumped for a combined 0.5% increase in June. The data looks promising—inventory levels tend to rise in positive economic environments.5

Uneven Industrial Activity

Industrial production rose 0.2% in July. This growth was lower than expected due to declining motor vehicle production dragging on the index.6

Mixed Housing Data

The housing market index surged by 4 points as homebuilders experience an increasing demand from buyers.7 But despite the growing appetite for new construction, July’s housing starts slipped, in part because builders are struggling to find experienced labor and new sites to build on.8

Looking Ahead

This week, we will receive more data that helps deepen our perspectives on housing market health, Q3 expectations, and the Fed’s upcoming plans.9

In this time of dramatic headlines and geopolitical uncertainty, we want to remind you that you are in control of your wealth and financial future. No matter what the talking heads want you to believe, stay focused on market fundamentals. Please call or email if you have any questions concerning specific market data or larger, developing issues.

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Sources

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2014 Emerald Connect, LLC