As we leave behind one of the most frigid winters in recent years, the weather has warmed up. Zoos from Moscow to London are serving ice-cream and lollipops to their animals just to keep them cool. The stock market has also “taken some heat” of its own lately. However, you (our clients) know the key to “beating the market heat” is staying the course and tuning out the “noise”. As I write this letter, the DOW is slightly down year to date. However, as you see in your portfolio, there has still been opportunity for growth within certain sectors.
Trade tensions have escalated recently, as has fear and uncertainty among investors. The back-and-forth on global trade is dominating news cycles and has seemingly encouraged short term volatility. However, we continue to believe this is only part of a negotiation process that could eventually lead to a more level playing field.
“Normal” in 2017 was steady positive returns every single month with very little volatility, as the S&P 500 never had a day that was up or down 2% and had only eight sessions that moved even 1% or more. As you know, 2018 has produced much more excitement.3
Fear of a trade war has largely drowned out fundamentals. Beyond this “noise”, we think stocks are well positioned due to strong earnings, a growing economy, and the effects of last year’s tax bill.2 We believe we could see strong double-digit gains in the fourth quarter, taking the S&P 500 to the 3,100 area” (+15%) and that the index could climb to 3,400 (+25%) in 2019.4
Historically, the second year of a president’s term in office is the weakest year for the stock market. In addition, the weakest quarters in that year have been the second and third quarters. However, after the third quarter, the market has appreciated by as much as 40% over the next two and a half years. The third year in office has brought stock market returns that average over 15% since 1945.4 We hope the coming third year of this term will be no different.
We trust you and your family are enjoying a wonderful summer “beating the heat” with some iced tea, watermelon, and air conditioning. Thank you for your friendship and trust.
Most sincerely,
Malcolm C. Tarver, III
Senior Vice President, Investments
Certified Investment Management Analyst ®
1Portfolio Strategy, Michael Gibbs, June 26, 2018
2Charts of the Week, Andrew Adams, June 27, 2018
3Investment Strategy, Raymond James, June 19, 2018
4Financial Advisor Magazine, Evan Simonoff, June 7, 2018
Past performance does not guarantee future results and there is no assurance that the objectives will be met. Investing involves risk and you may incur a profit or a loss. The information and opinions provided have been obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed. Expressions of opinion may not necessarily be those of Raymond James & Associates and are as of this date and are subject to change without notice. The opinions expressed are provided solely for informational purposes and not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Long-term investing does not insure a profitable outcome. Investment Management Consultants Association (IMCA®) is the owner of the certification marks “CIMA®,” and “Certified Investment Management Analyst®.” Use of CIMA® or Certified Investment Management Analyst® signifies that the user has successfully completed IMCA’s initial and ongoing credentialing requirements for investment management consultants. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow”, is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. Investors may not make direct investments into any index. Links are being provided for information purposes only. Some of the links being provided Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. Some of the content is prepared by Raymond James for financial advisor use.
