It was only a few months ago when we were writing about the Dow Jones Industrial Average posting a 9 week winning streak, fueled primarily by positive corporate earnings, a more “friendly” Federal Reserve, and optimism over trade negotiations between the U.S. and China. But as we know, things change quickly, and so can the mood of the market.
The stock market was already having a bad month, due in large part to trade tensions and tariffs with China, and things only got worse after another country was brought into the tariff “club”. President Trump tweeted last Thursday night that “the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP” – and stocks fell over 1% on Friday. Simply put, the market does not like tariffs and trade wars as they are a disruption to the supply chain and create uncertainty and instability, interfering with the running of the economic engine.
For the week the Dow Jones Industrial Average shed 3% posting its sixth straight weekly loss, its longest weekly losing streak since 2011. The NASDAQ Composite dropped 2.4% and the Standard & Poor’s 500 Index lost 2.6%. May was the first losing month of the year for the major averages – with the S&P 500 tumbling 6.6%. Bottom line, the market is being weighed down by concerns over a worsening trade war with China and the possibility of Mexico being brought into the fray.
In our opinion, the market still believes all of this will be worked out (or it would be down more), but things are definitely much more uncertain now and the stress level is rising. In times like this it is especially important to be balanced and diversified, while keeping a long term perspective/view. We’ll be getting the May Jobs Report number this Friday, which the market will be looking at more than usual due to the recent market volatility, for a read on how the labor market is holding up. Expectations are for gains of 183,000 jobs and for the unemployment rate to remain at 3.6%.
All the best,
Southport Station Financial Management, LLC