After posting gains every week since September, U.S. stocks declined by market’s close on Friday. The S&P 500 and Dow ended their longest stretch of weekly increases since 2013, and the NASDAQ ended its own 6-week streak. By November 10, the S&P 500 declined 0.21%, the Dow was down 0.50%, and the NASDAQ slipped 0.20%. Meanwhile, the MSCI EAFE dropped by 0.45%.
While these declines are not huge, understanding why stocks dropped after several weeks of steady gains is important. The markets are incredibly complex, so we cannot point to one single detail that drove their performance. We can, however, help you gain insight into what influenced investors’ decisions.The Market’s Drop in Context.
The Market’s Drop in Context
In many ways, uncertainty is to blame for last week’s losses, from a variety of angles:
- Healthcare: Equities dropped as companies continue to analyze changing dynamics in the industry, including potential competition from the tech world. Developments on medical devices and healthcare equipment could create quicker distribution models while decreasing costs, threatening traditional business practices.
- Energy: Tension between Iran, Saudi Arabia, and Lebanon – and the accompanying geopolitical uncertainty – contributed to crude oil prices slipping, which led Energy stocks to lose ground.
- Tax Reform: On Thursday, November 9, the Senate released its tax-reform proposal, which includes significant differences from the current House bill. In particular, the Senate’s decision to delay corporate-tax reductions until 2019 led to a stock sell-off. This change from the House bill also fueled concern about the likelihood of fiscal reform moving forward at all.
What Lies Ahead
No one knows exactly when or how taxes may change – and who will experience the greatest impact. For tax reform to occur, the House and Senate will have to work through the number of places where their plans diverge and align their political priorities. At the same time, the Federal Reserve could raise interest rates as many as 4 times over the next year, which could also alter the financial landscape.In the coming weeks, we will gain more information on tax reform and monetary policy. As we digest information, we will continue focusing on how current circumstances affect clients’ long-term goals. As always, if you have questions about your financial life, contact us anytime.
Wednesday: Consumer Price Index, Retail Sales, Business Inventories
Thursday: Industrial Production, Housing Market Index
Friday: Housing Starts
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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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.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
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Past performance does not guarantee future results.
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- www.bloomberg.com/news/articles/2017-11-09/asia-stocks-brace-for-volatility-as-dollar-falls-markets-wrap, www.usnews.com/news/business/articles/2017-11-10/most-asian-shares-track-wall-street-losses-on-us-tax-fears
- www.bloomberg.com/news/articles/2017-11-09/asia-stocks-brace-for-volatility-as-dollar-falls-markets-wrap, www.bloomberg.com/news/articles/2017-11-10/lebanon-demands-prime-minister-hariri-s-return-from-saudi-arabia