Solar Eclipses, a Lottery Winner and Nuclear War.. Pretty Standard
August 1st – August 4th
For the first week of August the S&P 500 was up 0.30% and the Dow Jones Industrial Average was up 0.94%, not slouchy returns to start the month by any means.
If you’ve been invested in any sort of index fund or mutual fund that is equity (stocks) focused within the past year you’ve experienced some pretty nice returns. 11.93% in the green for the S&P 500 (US stock index) Year-To-Date and 17.80% up on the MSCI EAFE (international stock index) as of August 4th Year-To-Date.
August 7th – August 11th : North Korea and Uncertainty
But unfortunately for all of us the market cannot go up every single day, week, year, because it’s just not feasible. Sorry boys and girls the party probably won’t last forever, eventually it’ll get broken up (or at least slow down) if it’s too rowdy. The neighbors are going to complain.
That and we were due for somewhat of a slowdown eventually. That slow down began in the second week of August which could partially be attributed to the James Bond villain-like dictator who leads that one recluse country on the Korean Peninsula. Can you guess which nation I’m referring to? (Hint it’s not the Southern one)
North Korea kind of going off its rocker the past month launching test missiles left and right didn’t exactly help ease investor’s worries. FYI whenever there’s fear in the air whether it stems from the possibility of nuclear war, the next outbreak of whatever ZIKA-like superbug or a terrorist attack, markets typically react in a negative way. Investors tend not to be huge fans of uncertainty and that is what all the aforementioned events most definitely bring.
So when you have of a loose cannon (to say the least) in North Korea threatening to nuke US territories, US Allies and the US itself, well yeah… the equity market reaction is going to be somewhat on the unfavorable side and volatility will likely tend to increase.
However, lucky for all of us so far this war of words between the US and North Korea seems to be just that for the time being… a war of words. Assuming that this geopolitical three-ring circus blows over (I’m no ranking military official so I will wholeheartedly admit I have no idea what the hell is going to happen) it’s difficult to tell if we can put this event in the category of a truly “market-shaking” event.
In Jake’s opinion a one-week market drop for the S&P 500 of 1.37% during the week of August 11th and a one-week drop of 1.48% for the MSCI EAFE during the week of August 11th weren’t exactly earth-shattering losses.
It’s also important to note that the stock market slowdown we saw during the “fire and fury” exchange of words with North Korea and President Trump was not completely responsible for the market pullback we witnessed in the middle of August. In fact, days before our war of words with North Korea began the stock market was showing signs of a minor slowdown.
August 14th – August 18th : Charlottesville
As for the week of August 18th things got a wee bit more interesting. The events that occurred in Charlottetown and the political response to the events over the course of the week caused markets to stutter a bit. That in conjunction with some changes within the President’s inner advisory council was enough to make us all remember that markets can and do go down.
Thursday August 17th brought the some fun back to US Markets as the S&P 500 recorded a single-day loss of 1.54%.
Decent single-day downturn? For sure. Reason to be concerned? Probably not. As mentioned before, a friendly reminder that markets CAN and DO go down isn’t necessarily a bad thing especially considering the recent run we have been on.
As far as the week as a whole, the S&P 500 pulled back only 0.58% while the International MSCI EAFE Index had a very modest 0.07% gain. All and all the week didn’t make or break stock markets, then again one week alone probably shouldn’t make or break equity markets especially if you’re taking a long-term view with your investments as this commentary will continue to preach.
August 21st – August 25th: The Great American Eclipse
Then the Great American Eclipse occurred. For 2 and a half minutes the country was mesmerized with what was going on in the sky and apparently markets were too. Not much to speak of as far as markets went for the Monday the 21st as it seemed more people were preoccupied with looking at the sky than trading as the S&P 500 barely fluctuated throughout the day.
Tuesday brought a nice bounce to the markets with the second half of the week bringing more somewhat uneventful happenings. Other than the fact that you or I didn’t win the 700 million dollar lotto prize which we were snatching up tickets in hopes of early retirement but then again if you did win the 700 million dollar prize you probably wouldn’t be reading this right now.
To close the week of the August 25th, markets fared pretty well all things considered. The S&P 500 saw a weekly bounce of 0.75% in the green while the MSCI EAFE saw a modest 0.61% bump in the right direction.
August 28th – August 31st: Hurricane Harvey – Mayweather/McGregor
The weekend leading up to this week saw unprecedented flooding in parts of Southeastern Texas and unprecedented attention placed on the sport of boxing.
In some locales around Houston nearly 50 inches of rain were dumped in a matter of four days. On Saturday nearly 50 million viewers tuned in to watch Floyd Mayweather take on Connor McGregor.
The immediate impacts of Hurricane Harvey was that on energy in that many oil refineries were forced to close, thus adversely affecting the already somewhat beat down energy sector. It may be a few more weeks or months until the long-term effects of Harvey on the market are truly shown.
Additionally more political turmoil returned as on Tuesday North Korea decided to escalate the situation in the region by firing a ballistic missile over Japan just as tensions seemed to be deescalating.
Tensions with North Korea may continue to weigh on markets as we move forward into September.
August in a Nutshell
So where does that leave us for the entire month of August? Well, actually pretty close to where we began despite the many happenings throughout the Month. The S&P 500 was up 0.20%, being essentially flat for the month and the MSCI EAFE was up 0.40% narrowly edging out it’s US counterpart for August.
As we march through September let’s keep an eye on the continued geopolitical tensions with North Korea, showdowns in Washington dealing with the 2018 budget and debt ceiling and of course how many times I will be listening to “September” by Earth, Wind and Fire.
The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Jacob Dahlstrum and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.