Volatility and mediocre returns continued in the month of April as investors navigated concerns of rising interest rates and inflation. For the month of April, the S&P 500 slightly declined -.38%, as the FTSE All World Ex-U.S. Index increased 1.76%. Year to date through April 30th, the S&P 500 and the FTSE All World Ex-U.S. were both flat, returning .38% and .43% respectively. Despite lukewarm market performance, we are in the 2nd longest economic expansion in history, just shy of 9 years long.
Total non-farm payroll employment increased by 164,000 in April and the unemployment rate decreased to 3.9%, the U.S. Bureau of Labor Statistics reported. Real gross domestic product (GDP) increased at an annual rate of 2.3% in the first quarter of 2018, according to the advance estimate released by the Bureau of Economic Analysis.
Core inflation reached 1.9% in March, and we believe it may rise further in 2018, most likely over the Fed’s 2% target. We do believe that the Fed will continue raising rates in 2018. The yield on the 10-year Treasury is also rising and we feel that the rise will continue – which could impact mortgage rates, the U.S. dollar and the yield curve.
Despite strong economic numbers, we believe that the economy is heading into a slower phase, especially into 2019, as some of the shorter-term stimulus dissipates. Recession risks increase approaching 2020, as interest rates and fiscal debt levels rise.
Internationally, most economies are growing, though not booming, and we expect this trend to continue. The global aggregate manufacturing purchasing managers’ index reached a six-year high going into 2018. The Eurozone is growing particularly fast, because of an undervalued currency and rising consumer confidence. Though the path is still uncertain, tensions between North Korea and the U.S. seem to be easing.
We know that market volatility, especially after long periods of relatively calm growth, can be unnerving, and we encourage you to talk to us about your current allocation. If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.
Data are as of May 7th, 2018
Past performance does not guarantee future results.
Diversification does not guarantee investment returns and does not eliminate the risk of loss.
The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. Indexes are unmanaged.
The FTSE All-World ex US Index is one of a number of indexes designed to help investors benchmark their international investments. The index comprises Large and Mid-cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
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