Market Update - March 11, 2019Submitted by Jodi Vleck , Beta Wealth Group on March 11th, 2019
For the week ending March 8th, U.S. stocks were primarily negative with the S&P 500 and Dow Jones both down a little over 2 percent. Small caps fared worse, down over -4%. The slight drawdown was largely attributed to worries on perceived weakening in the global economy, particularly Europe, and concerns around the timing/structure of a US-China trade deal.
Meanwhile, economic data stateside was largely positive. Results for ISM non-manufacturing/services were higher. However, the U.S. Change in Nonfarm Payrolls were 25k compared to an expected 180k last month, uncharacteristically low. There have only been 2 months since 2011 where the number has come in lower. Despite this low number, wage growth remains strong at 3.4% year over year and unemployment remains historically low at 3.8%.
European central bank comments contributed to the U.S. selloff announcing cuts to their 2019 real GDP growth forecast from 1.7% to 1.1% while announcing smaller cuts to their 2021 and 2021 estimates. Emerging markets were led by strength in China, where the government released comments indicating policy measures to stimulate growth, including infrastructure spending and lower taxes in certain instances.
In the U.S., utilities were the only positive sector for the week, posting a small gain. Energy declined 4% due to a leveling off in oil prices. Health care was dragged down as a result of individual company reports. U.S. bonds fared well last week, gaining upwards of a percent, as flows away from equities and other risk assets found their way to bonds. The USD gained about 1%.
While markets are unpredictable and trying to pinpoint a reason behind each move isn’t a science, keeping this in mind might be helpful. Since the market low on March 9, 2009 following the ‘Great Recession,” an investor would have gained 400% had they invested in the S&P 500, a 17.4% average annual return. If you had invested at the previous highs on Oct 9, 2007, you still have done pretty well, averaging a 7.3% average annual return or 124%. The reason we bring this up is to remind investors that despite the stomach acid you might feel when markets drop, equities remain a powerful vehicle for buy and hold capital appreciation.