Domestic markets fell last week due to negative trade news and declining tech stocks, with the S&P 500 and Dow both breaking their multi-week winning streaks. Meanwhile, the NASDAQ posted losses for 4 days in a row for the first time since April and experienced its worst September start since 2008.[1] Overall, the S&P 500 lost 1.03%, the Dow dropped 0.19%, and the NASDAQ gave back 2.55% for the week.[2] International stocks in the MSCI EAFE also declined, losing 2.89%.[3]
The Cboe Volatility Index (VIX), which can help gauge market fears, increased 15.8% last week.[4] This increase matches what often occurs during September, when volatility returns after waning during the summer months. In fact, since 2007, volatility has been above average in September.[5]
Of course, the change from one month or season to another isn’t enough to trigger market losses and rising volatility. Let’s analyze what drove these experiences last week.
- Trade tension escalated between the U.S. and China.
The U.S. is getting closer to resolving trade issues with Mexico, Canada, and the European Union¾and the countries may unite against China’s trade approach. As a result, the likelihood of calming the trade dispute between the U.S. and China is fading.[6] Last week, President Trump said he was prepared to add tariffs to another $267 billion in Chinese goods. These tariffs would be in addition to the $200 billion that may launch soon, which one expert said could reduce the S&P 500 by 5%.[7]
- Tech stocks dropped.
Last week, the technology sector declined by 2.9%.[8] Tech has performed better than any other sector this year and has been a market leader for 3 years. But concerns about increasing regulation—with a focus on social media companies—weighed on investors’ minds last week.[9]
- Wage growth increased.
The latest jobs report surpassed expectations, with the economy adding 201,000 jobs in August. Year-over-year wage growth also rose more than expected and hit its fastest pace since 2009.[10] This wage increase contributed to stock losses, because it could mean that 2018 will have 2 additional interest rate increases¾with more on the horizon for 2019.[11]
Last week certainly provided data and headlines for investors to digest. But the job market, economic fundamentals, and market remain strong.[12] For the moment, we’ll continue to review the data we receive and seek new ways to help you prepare for what lies ahead.
ECONOMIC CALENDAR
Tuesday: JOLTS
Thursday: CPI, Jobless Claims
Friday: Retail Sales, Industrial Production, Consumer Sentiment
| DATA AS OF 9/7/2018 | 1 WEEK | SINCE 1/1/18 | 1 YEAR | 5 YEAR | 10 YEAR |
| STANDARD & POOR’S 500 | -1.03% | 7.41% | 16.49% | 11.65% | 8.74% |
| DOW | -0.19% | 4.84% | 18.97% | 11.67% | 8.73% |
| NASDAQ | -2.55% | 14.47% | 23.52% | 16.64% | 13.36% |
| INTERNATIONAL | -2.89% | -7.09% | -2.23% | 1.79% | 1.28% |
| DATA AS OF 9/7/2018 | 1 MONTH | 6 MONTHS | 1 YEAR | 5 YEAR | 10 YEAR |
| TREASURY YIELDS (CMT) | 1.98% | 2.30% | 2.53% | 2.82% | 2.94% |
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
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Here are some tips for filing an amended return:
- Fill out paper Form 1040X, Amended U.S. Individual Income Tax Return. Mail the form to the address in the form’s instructions. If you received an IRS notice, send the form to the address in the notice.
- Include other IRS forms or schedules with Form 1040X (if you used them during your initial filing).
- Don’t send an amended return to correct math errors. The IRS makes corrections.
- Don’t send an amended form if you forgot to include required forms or schedules. The IRS sends notices requesting any missing items.
- You’ll need to send separate 1040X forms (in separate envelopes) for each year you’re filing amendments.
- Wait for the refund from the original return before filing an amended return. You may cash the refund check.
- If you owe money and are sending an amended return, pay the tax as soon as possible. Interest and penalties accrue.
- Processing amended forms may take up to 16 weeks.
Other details may apply, and you can find more information on the IRS website.
This information is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax advisor.
Tip adapted from the IRS.gov[13]
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Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.
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[1] https://www.cnbc.com/2018/09/07/us-markets-jobs-report-and-data-in-focus.html
[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
[3] https://www.msci.com/end-of-day-data-search
[4] https://www.cnbc.com/2018/09/07/us-markets-jobs-report-and-data-in-focus.html
[5] https://www.bloomberg.com/news/articles/2018-09-07/summer-s-end-breaks-s-p-500-s-momentum-as-tech-trade-war-bite?srnd=markets-vp
[6] https://www.marketwatch.com/story/near-term-likelihood-of-us-china-trade-pact-seen-dimming-2018-09-07
[7] https://www.bloomberg.com/news/articles/2018-09-07/summer-s-end-breaks-s-p-500-s-momentum-as-tech-trade-war-bite?srnd=markets-vp
[8] https://www.marketwatch.com/story/stock-futures-point-to-lower-open-after-jobs-report-sp-500-could-have-4th-down-day-2018-09-07?dist=markets
[9] https://www.cnbc.com/2018/09/07/us-markets-jobs-report-and-data-in-focus.html
[10] http://wsj-us.econoday.com/byshoweventfull.asp?fid=485659&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
[11] https://www.marketwatch.com/story/stock-futures-point-to-lower-open-after-jobs-report-sp-500-could-have-4th-down-day-2018-09-07?dist=markets
[12] https://www.marketwatch.com/story/stock-futures-point-to-lower-open-after-jobs-report-sp-500-could-have-4th-down-day-2018-09-07?dist=markets
[13] https://www.irs.gov/newsroom/what-taxpayers-should-know-about-amending-a-tax-return
