Last week, the East Coast prepared for Hurricane Florence, which roared through the Carolinas and Georgia. As investors kept their eyes on the weather and its potential for destruction, estimates emerged of up to $27 billion in hurricane damage. This potential for damage contributed to insurance companies in the S&P 500 declining last week.1 While the hurricane likely won’t have a large effect on our economy, its destruction could influence data for months to come.2
Meanwhile, last week brought another milestone in our economy: the 10th anniversary of Lehman Brothers’ bankruptcy.
For 158 years, the Wall Street firm Lehman Brothers, weathered the markets’ changes. By 2008, however, various challenges, including excessive risk taking, led to its demise. The firm’s unexpected bankruptcy announcement shocked investors and triggered market panic, leading what was a simmering financial crisis to become the Great Recession. A decade later, the markets are on more solid ground, and banks hold more capital and have stronger regulation. While some experts warn of a potential looming recession, current market performance and economic data indicate just how far we’ve come.3
Let’s examine last week’s data to understand examples of where we are today: Domestic indexes rebounded to post healthy gains for the week, with the S&P 500 adding 1.16%, the Dow gaining 0.92%, and the NASDAQ increasing 1.36%.4 International stocks in the MSCI EAFE were also up, gaining 1.76%.5
In addition, we received the following updates, which support a picture of a more robust economy:
- Consumer sentiment jumped: The September reading was at its 2nd-highest point since 2004. The data reveals that consumers expect the economy to grow and create more jobs.6
- Retail sales stalled but are primed for growth: Spending barely increased in August, after months of strong growth. However, analysts believe this data is “a blip” rather than an emerging trend, as tax cuts and a healthy labor market leave Americans with money in their pockets.7
- Industrial production rose for the 3rd-straight month: Auto manufacturing contributed to higher than expected industrial production in August. For now, trade tensions have not yet hurt this sector.8
These data reports may not show blockbuster growth, but together they indicate our economy is doing well. In fact, they were strong enough to lead many economists and analysts to increase their projections of how fast the economy expanded during the 3rd quarter.9
Looking back, the markets have come far from where they were 10 years ago. But risks will always remain, as Hurricane Florence and Lehman Brothers remind us. Today and in the future, we are here to help you understand where you are and plan for whatever may lie ahead.
Also, for those affected by the hurricane, we’re ready to support your recovery and provide the financial guidance you seek.
Tariff History Overview
An article from Ben Phillips of Mahoney Asset Management
Throughout his presidential campaign Trump always empathized his positioning on trade so we somewhat knew it would affect the markets down the line. Trade war talks, and tariffs caused the correction earlier this year but with both of them becoming more and more frequent the markets are becoming less affected by the news.
Three main tariff announcements this year:
- January: Solar panels and washing machines
- March: Steel and aluminum
- July: China goods
Market dropped significantly in both January and March 2018 following the tariffs and trade talks. But more recently through July to September, it has continued to grow despite more being implemented. This is an argument to suggest investors are becoming less concerned about the markets reaction to tariffs and trade talks.