Investment Commentary –June 5th, 2018

Year to Date Market Indices as of Market Close June 5th, 2018
Dow 24,799 (0.33%)
S&P 2,748 (2.81%)
NASDAQ 7,637 (10.64%)
Gold $1,300 (-1.41%)
OIL $65.34 (9.67%)
US 10Y Treasury (50.76%)
Barclay Bond Aggregate (-3.43%)
Fed Funds Rate 1.75 (last increase was 3/21/18)

Nasdaq scores record as stocks advance modestly

U.S. stocks closed mostly higher on Tuesday, with the Nasdaq Composite notching a record for a second straight day, as large technology stocks advanced. The tech-heavy index COMP, +0.41% advanced 31.40 points, or 0.4% to 7,637.86. The S&P 500 index SPX, +0.07% closed 1.92 points, or less than 0.1% higher to 2,748.79, as gains in consumer discretionary, materials and technology sectors were counterweighed by losses in financials, utilities and consumer staples shares. Dow Jones Industrial Average DJIA, -0.06% closed marginally lower, down 13.71 points, or less than 0.1%, to 24,799.98. Among the best performers on the S&P 500, Macy’s Inc M, +7.87% jumped nearly 8%, adding to its 4% advance on Monday.

Social Security taps into trust fund for first time in 36 years

Medicare’s finances were downgraded in a new report from the program’s trustees on Tuesday, while the projection for Social Security’s stayed the same as last year. Medicare’s hospital insurance fund will be depleted in 2026, said the trustees who oversee the benefit program in an annual report. That is three years earlier than projected last year. This year, like last year, Social Security’s trustees said the program’s two trust funds would be depleted in 2034. For the first time since 1982, Social Security had to dip into the trust fund to pay for the program. It should be stressed that the reports don’t indicate that benefits disappear in those years. After 2034, Social Security’s trustees said tax income would be sufficient to pay about three-quarters of retirees’ benefits. Congress could at any time choose to pay for the benefits through the general fund.

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May recap: May proved to be a month of modest gains for stocks, as the S&P 500 rose 2.2% and the Dow added 1.1%. The big action took place in other markets, as the yield of the 10-year U.S. Treasury bond rose at mid-month to its highest level in seven years and crude oil prices reached their highest level in three and a half years.

Tariff tussle: The focus of recent trade tensions shifted from China to key Western trading partners of the United States, as the Trump administration imposed tariffs on steel and aluminum imports from Canada, Mexico, and the European Union. Leaders of those governments condemned the tariffs and threatened retaliation, sending stocks of U.S. manufacturing companies lower.

Italian instability: Turmoil in Italian politics triggered much of the week’s bond market volatility on both sides of the Atlantic. Early in the week, Italy’s president blocked the formation of a new government that has questioned the country’s membership in the European Union. Tensions subsequently eased after two antiestablishment parties agreed to form a governing coalition.

Industry winners and losers this past week:

Winners: Sporting goods stores, Department stores, recreational goods.
Losers: Computer based systems, Semiconductor-Memory chips, oil and Gas exploration.

Upcoming events:

Other Notable Indices (YTD)
Russell 2000 (small caps) 8.20
EAFE International -0.36
EAFE Emerging Markets 1.03
Shiller Annuity Index 6.31

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.