Well the 1st quarter of 2018 is over and what a wild ride it was. It reminds me of the lyrics from an Edgar Winter song from the 1970’s Free Ride – “The mountain is high, the valley is low, and you’re confused on which way to go.”
During the 1st quarter we saw the stock market hit an all-time high (the mountain), then plummet over 10% in less than two weeks (the valley), and since then bounce up and down (confused on which way to go). Through it all, we broke a streak of 15 straight quarters (almost 4 years) with positive quarterly equity returns.
Economic activity, on the other hand, continued to remain positive. GDP (gross domestic product) for the 4th quarter of 2017 finished at 2.9%, and over the last 3 quarters has averaged a tick over 3%. While GDP is a backward-looking metric, leading economic indicators continue in an upward trend. As such, I see no signs of a slowdown in the economy on the horizon.
April brings the start of 1st quarter 2018 corporate earnings. I think this may be the catalyst to stabilize the stock market. Corporate earnings are estimated to continue on a solid growth trend, and this earnings cycle will be the first which reflects the impact from tax reform.
I continue to favor stocks over bonds as stocks offer a better value, especially after the recent pullback in stock prices. Also, stocks have some tailwinds that include: 1) solid global growth;
2) accelerating domestic activity; 3) capital spending improvement; 4) real household median incomes jumping with strong employment; and 5) inflation remaining below 2%. Source: Tony Dwyer
In addition, April has been a positive month for stocks in 9 of the last 10 years. Going even further back, since 1950 the benchmark has posted an average 1.5 percent gain in April. Source: CNBC.com
As such, I see no need for any significant adjustment in our investment plan. I am making some small adjustments between industries/sectors related to tax reform and the announced tariffs.
I hope you find this report helpful. Please share it with anyone who you feel would benefit from the information.
April Calendar of Events (comments and additions for future months are always welcome)
- April is National Autism Awareness month. Let’s all get educated on this issue and works towards acceptance and inclusion of people dealing with autism.
- April is also National Financial Capability month. We at Directional Wealth Management commit to equipping individuals to lead better financial lives through an integrated framework of educational resources, collaborative tools, and personal one-to-one advice.
April 10th Christian’s wife Maecy birthday
April 12 & 13th We adopted our 4-legged children Coco (2010) and Buddy (2013)
April 17th Tax Day. Remember to make those IRA or Roth contributions.
April 22nd Earth Day – let’s all recycle, turn out lights when we leave rooms, and do all we can for our environment
April 25th My daughter Satya’s birthday
April 25th Administrative Professionals day – remember your staff
Sources: Yardeni Research, Inc., Tony Dwyer, Raymond James & Assoc, CNBC.com
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