Mark Levy’s Economic Update – Tuesday, May 22, 2018

June 8th, 2018 by Legacy Wealth Planning

Yesterday, the Dow 30 Industrial Average rallied almost 300 points on news that the United States has compromised with China on trade and that Tariffs, for the time being, will not be used. The Index is currently hovering around 25,000 and today, the Index is down 100 points and is most likely digesting yesterday’s move.

We seem to be moving toward the higher end of the trading range that the markets have been in for quite a while. Remember, the approximate high for the Dow 30 Industrial Average was 26.616 back in late January. One reason could be impressive corporate earnings. The numbers for the first quarter were strong even without the boost from the new tax law. Earnings for the S&P 500 index grew over 26% year over year (including the new tax law), which was the best since the fourth quarter of 2010. Energy was the biggest gainer as oil prices have risen significantly, followed by technology, materials, industrials and financials.

Lately, interest rates have risen along with the U.S. Dollar. The 10-year Treasury Bond now yields solidly over 3% and the dollar has rallied more than 5% from its February lows. U.S. Dollar strength and trade war fears have created headwinds for emerging market equities of late, but LPL Financial believes that emerging markets have attractive earnings growth outlooks. They also believe that the interest rate rise will be contained which will favor this emerging market asset class.

So, what does this all mean for us? Well, if you didn’t know it, there is an old Wall Street adage for traders that says; “sell in May and go away” (a saying that started in England based around the St. Leger Stakes, a popular horse race in September that marked the end of summer and a return of the big traders and market volume). This is based on the seasonal market pattern in which the six months from May through October are Seasonably weak for stocks. LPL Financial doesn’t think this may hold true this year as the S&P 500 has closed higher in May during the past five years and has risen over the entire six-month period during five of the past six years, with an average equity gain of 4.8%. When you also consider that the S&P 500 is in a bullish trend (the index is above its 200-day moving average), LPL Financial believes that dips are buying opportunities.

All of the Advisors and Staff at Legacy Wealth Planning hope that this letter finds you well and always know that we appreciate your business. If you have any investment questions, do not hesitate to contact us. All the best – Mark

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Economic forecasts may not develop as predicted. Some of this research material has been prepared by LPL Financial. All indices are unmanaged and may not be invested into directly. Referenced material: LPL Research Weekly Market Commentary & LPL Research Weekly Economic Commentary, both dated May 21, 2018, along with LPL Research Weekly Economic Commentary, dated May 7, 2018 & May 14, 2018. Approved Tracking #: 1-733300.

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