Friday, September 28, was the last trading day in 2018’s 3rd quarter, and the S&P 500 posted its strongest quarterly return in nearly 5 years.1 The Dow also showed impressive returns by beating expectations for the quarter, while the NASDAQ notched record highs against 2017 numbers. For the quarter, the S&P jumped 7.2%, the Dow increased 9.3%, and the NASDAQ moved up 7.1%.2

Weekly numbers, however, revealed mixed performances: the S&P 500 slipped 0.54%, the Dow fell 1.07%, and the NASDAQ gained 0.74%.3 Internationally, the MSCI EAFE dropped 1.07%.4

As we learn more about the 3rd¬ quarter, some details from last week offer perspectives on where we stand today.

What We Learned About the 3rd Quarter Last Week

1. Consumer outlook suggests positive trends continue.

A few early reports have given us a sense of positive trends in consumer activity during the 3rd quarter:

  • Consumer sentiment rose in September to finish at healthy levels that beat August’s performance, marking the 3rd time the index has moved above 100.5 With personal income optimism hitting a 14-year high, the positive trend suggests that nearly every population group now benefits from the 3rd quarter expansion.6
  • Consumer confidence neared its highest reading since 2000, beating analyst predictions and inching closer to the dotcom’s record highs.7 This rise came after a surge in August, prompting predictions that spending strength will carry us through 2018.8 From sentiment boosts in the stock market to positive home-buying trends, consumers remain optimistic.9

These numbers suggest healthy consumer outlooks, positive economic attitudes, and possible trends in increased spending.10

2. Companies anticipate softer profits.

Although corporate earnings in the 1st and 2nd quarters rose roughly 25%, 3rd quarter corporate earnings may miss that mark. Of the 98 companies in the S&P 500 that have released earnings outlooks, 74 predicted that earnings will fall below expectations from Wall Street. This ratio is the worst since the earnings recession of 1st quarter 2016.11 Even with the softer outlook, analysts still expect the S&P 500 to post numbers that indicate a growing economy.12

3. Gross Domestic Product (GDP) growth shows signs of slowing.

Core capital goods (not including aircrafts) dropped 0.5% in August after July’s negative performance—as demand for computers, electronic products, and motor vehicles waned. The shift prompted some analysts to revise their 3rd¬ quarter GDP predictions downward. Yet, with a bump in wholesale and retail inventories, overall 3rd quarter growth remains in positive territory.13 The Atlanta Federal Reserve now predicts growth to be 3.8%, revised from an earlier prediction of 4.4%.14

4. Tariffs start to drag 3rd quarter growth estimates.

The early effects of tariffs seem to have surfaced, as exports are now trending negatively. On September 27, the International Trade in Goods report posted numbers that may predict slower 3rd quarter growth:

  • Exports dropped 1.6% in August, continuing July’s downward trend.
  • Imports rose 0.7% yet have so far posted a trade negative for the quarter.
  • The trade deficit hit $75.8 billion, yet analysts believe this gap will narrow slightly once more 3rd quarter data emerges.15

If this trend involving experts and imports continues, the U.S. dollar may take a hit.16 Meanwhile, on September 24, President Trump added tariffs on $200 billion worth of Chinese goods, and China responded with its own tariffs on $60 billion of U.S. products. Though negotiations between the two countries have stalled, we will monitor the situation.17

What’s Ahead

The Federal Reserve remained optimistic last week about the economy, raising the interest rate from 2% to 2.25%. The 3rd increase this year is no surprise but does suggest confidence in a growing economy and low unemployment numbers, and that a 4th quarter hike is highly probable.1818

With new data coming in, we’ll deepen our understanding of the economy’s performance in the 3rd quarter. If you have questions about how this may affect you or your financial life, contact us today; we’re ready and happy to help.

My Thoughts on the 4th Quarter,
Oct 1 Fox Business Interview:


 

Watch Now


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
© Mahoney Asset Management

INVESTING RISK DISCLOSURE
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Mahoney Asset Management for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

IMPORTANT CONSUMER INFORMATION
This web site has been prepared solely for informational purposes. It is not an offer to buy or sell any security; nor is it a solicitation of an offer to buy or sell any security.This site and the opinions and information therein are based on sources which we believe to be dependable, but we can not guarantee the accuracy of such information.

Representatives of a broker-dealer or investment adviser may only conduct business in a state if the representatives and the broker-dealer or investment adviser they represent: (a) satisfy the qualification requirements of, and are approved to do business by, the state; or (b) are excluded or exempted from the state’s licenser requirements.

An investor may obtain information concerning a broker-dealer, an investment advisor, or a representative of a broker-dealer or an investment advisor, including their licenser status and disciplinary history, by contacting the investor’s state securities law administrator.

SECURITIES: ARE NOT FDIC-INSURED/ARE NOT BANK-GUARANTEED/MAY LOSE VALUE
This information is intended for use only by residents of CA, CT, DC, FL,, MA, MD, MN, NC, NJ, NY, OH, PA, and VA. Securities-related services may not be provided to individuals residing in any state not listed above.

The financial calculator results shown represent analysis and estimates based on the assumptions you have provided, but they do not reflect all relevant elements of your personal situation. The actual effects of your financial decisions may vary significantly from these estimates–so these estimates should not be regarded as predictions, advice, or recommendations. Mahoney Asset Managment does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences.

Securities offered through
Newbridge Securities Corporation,
member FINRA / SIPC

Investment Advisory Services offered through
Newbridge Financial Services Group Inc.,
an SEC Registered Investment Adviser.

Office of Supervisory Jurisdiction
5200 Town Center Circle, Tower One, Suite 306
Boca Raton, FL 33486

Toll-Free: 877-447-9625
Phone: 954-334-3450
Fax: 954-489-2390