Stocks Drop as Tariffs Rise – March 19, 2018
Markets experienced significant declines last week. The S&P 500 lost 5.95%, the Dow dropped 5.66%, and the NASDAQ declined 6.54%.1http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-UShttp://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-UShttp://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO With these losses, all 3 domestic indexes had their worst weekly performance in more than 2 years.2https://www.reuters.com/article/us-usa-stocks/wall-street-nosedives-as-investors-flee-on-trade-war-fears-idUSKBN1GZ1O8 International stocks also declined, with the MSCI EAFE giving back 2.64%.3https://www.msci.com/end-of-day-data-search
What caused markets to stumble in this way? While various economic reports came out and the Federal Reserve raised rates again, another topic triggered the declines: trade war concerns.4https://www.cnbc.com/2018/03/23/us-stock-markets-set-for-a-sharp-fall-at-the-open-amid-trade-war-fears.html
Weekly Focus: Analyzing Tariffs and Trade Wars
Last week, President Trump approved new tariffs on China as a punishment for taking American intellectual property. The tariffs could affect as much as $60 billion in Chinese imports—and Trump called this the “first of many” trade actions against the country.5https://www.cnbc.com/2018/03/22/trump-moves-to-slap-china-with-50-billion-in-tariffs-over-intellectual-property-theft.html
China indicated that it may retaliate and is “looking at all options” on how to respond. Apparently, everything is on the table—including targeting 128 American products, no longer purchasing U.S. Treasuries, and taking legal action through the World Trade Organization.6https://www.reuters.com/article/us-usa-stocks/wall-street-nosedives-as-investors-flee-on-trade-war-fears-idUSKBN1GZ1O8https://www.cnbc.com/2018/03/23/us-stock-markets-set-for-a-sharp-fall-at-the-open-amid-trade-war-fears.html
How did investors respond?
The new China-specific tariffs combined with Trump’s steel and aluminum tariffs earlier this month create growing concerns about a trade war.7https://www.cnbc.com/2018/03/22/trump-moves-to-slap-china-with-50-billion-in-tariffs-over-intellectual-property-theft.html The market declines we experienced last week are largely a reaction to these fears.8https://www.cnbc.com/2018/03/23/us-stock-markets-set-for-a-sharp-fall-at-the-open-amid-trade-war-fears.html
What might happen next?
These new tariffs have the potential to create 2 very different results:
- A trade war that stifles global growth
- A more even playing field for American companies
A trade war: If the U.S. and China go back-and-forth adding punitive tariffs to each other’s products, our economy could suffer. We could experience inflation, slower economic development, and higher interest rates, making expansion and growth harder for U.S. businesses.9https://www.cnbc.com/2018/03/24/china-development-forum-heres-what-experts-are-saying.htmlhttps://www.inc.com/zoe-henry/trump-steel-and-aluminum-tariffs-ripple-effects-your-business.html
A more even playing field: If the tariffs are successful, U.S. industries could benefit. Some U.S. steel producers are already boosting their production and hiring as the first round of tariffs goes into effect.10https://www.zacks.com/stock/news/296710/trump-tariff-amp-steel-industry-the-good-the-bad-amp-the-ugly
Where do we go from here?
The potential for a full-blown trade war exists, which could negatively affect the global economy. But this worst-case scenario is far from certain, and many opportunities exist to calm the rising tension.11https://www.cnbc.com/2018/03/19/signs-growing-for-global-trade-war-that-could-trigger-recession-deutsche-bank.html For now, we will continue analyzing exactly what is happening with tariffs and how different countries react.
CEO, Managing Director
MGO | Wealth Advisors
Tuesday: Consumer Confidence
Wednesday: GDP, International Trade in Goods
Thursday: Jobless Claims, Consumer Sentiment
Friday: U.S. Markets Closed for Good Friday
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
“It is better to have a permanent income than to be fascinating.”
— Oscar Wilde
- 1 cup frozen strawberries
- ½ cup fresh blueberries
- ½ cup fresh orange juice
- 2 teaspoons chopped and peeled fresh ginger
- ¼ cup plain low-fat (1 percent) yogurt
- 2 ice cubes
- Put strawberries, blueberries, orange juice, ginger, yogurt, and ice cubes in a blender.
- Blend until smooth. Occasionally, scrape down sides of the blender.
Recipe adapted from Good Housekeeping12http://www.goodhousekeeping.com/food-recipes/a11134/jump-start-smoothies-recipe-ghk0911/
What Are Your Rights as a Taxpayer?
It might come as a surprise to some, but you do have rights as a taxpayer. In fact, the IRS spells out those rights in its Taxpayers Bill of Rights.
- The first is the right to be informed. Taxpayers have the right to know what to do to comply with tax law.
- Taxpayers have the right to quality service. The agency is required to be prompt, courteous, and professional in providing assistance.
- Taxpayers are not required to pay more than the tax legally due.
- Taxpayers have the right to challenge, object, and provide documentation in response to IRS actions.
- Taxpayers have the right to appeal IRS decisions in independent forums.
- Taxpayers have the right to know the maximum amount of time to challenge IRS positions. They also have the right to know the amount of time the agency has to audit a tax year, collect a tax debt, and conclude an audit.
- Taxpayers have the right to privacy and to know their inquiries, examinations, or other actions comply with the law.
- Taxpayers have the right to confidentiality. They have the right to expect the information they provide to the IRS will not be disclosed to others unless authorized by the taxpayer.
- Taxpayers have the right to choose authorized representation in dealing with the agency. They have the right to request help from a Low Income Taxpayer Clinic if they’re unable to afford representation.
- Taxpayers have the right to expect a fair and just tax system. They have the right to expect the IRS to consider the facts that might affect their liabilities, their ability to pay, or their ability to provide information in a timely manner.
Other details may apply, and you can find more information on the IRS website.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Tip adapted from the IRS.gov13https://www.irs.gov/taxpayer-bill-of-rights
Keep Your Head Up
It’s not prayer, but sometimes you might wish you had done more of it before hitting the ball on a swing and lifting your head too soon to see your shot heading in the wrong direction.
Many players kick themselves after a bad shot, saying they lifted their heads (recall the prayer metaphor) too early.
Some pros are saying keeping your head down—as a way to hitting good drives—may be misguided.
After studying thousands of swings, experts found the habit may be counterproductive and causing more harm than good. Keeping your head down may be the cause of topping the ball.
So, what’s the solution? Develop an approach that involves rotating your head with the swing as opposed to keeping your head down. Here’s what it looks like:
- Stand with your legs straight.
- Face the target with your shoulders and hips.
- Rotate your head in the direction of the swing.
- Extend your grip as far away from your body as possible.
With the “head-down” approach, however, you tend to crowd the swing thereby restricting your ability to extend your arms, which limits you from making solid ball contact.
Keep practicing this new method until it becomes part of your muscle memory. Then hit a few slow shots before building up to full swings.
Tip adapted from Golf Digest14https://www.golfdigest.com/story/why-keeping-your-head-down-is-killing-your-swing
Positioning Yourself for Restful Sleep
You may have heard all the advice about not drinking coffee before bed, keeping your bedroom at a cool temperature, and eliminating distractions. But health experts say your sleep position may be a good indicator of your overall health and your ability to have a good night’s rest.
Unusual or unnatural sleep positions may be causing back pain, snoring, or preventing you from getting a complete night’s rest. Your sleeping position is even a reflection of your personality.
Here are different sleep positions and what they mean to your health and your personality:
- The Stomach: This one may lead to restless sleep and cause neck strains. Try a softer pillow or none at all.
- The Belly (Free Fall): This is similar to the stomach position, except you wrap your arms around a pillow with your head turned to the side. Researchers say belly sleepers are social and outgoing, but aren’t very open to criticism. About 7% of people sleep like this.
- The Back: This one can cause back pain (or make it worse). If you’re a snorer or have sleep apnea, this can exacerbate your problems. Your doctor may be able to help you make adjustments.
- The Soldier: This is like the back position. Your arms are at your side. You’re sleeping at attention. Researchers say you’re generally quiet and set high expectations for yourself and others. About 8% of people sleep like this.
- The Starfish: You lie on your back. Your arms are near your head. You’re generally a good listener and like to be the center of attention.
- The Side: You sleep on your side with your knees close to your chest. This may be the most comfortable side position.
- The Fetal Position: You’re curled up, sleeping on your side. More than 40% of people, mostly women, sleep this way. Researchers say you’re friendly and sensitive.
- The Log: You sleep on your side, both arms down, like a “log.” You’re easygoing and trusting.
- The Yearner: You sleep on your side with your arms in front of you. You’re open-minded, but stubborn and suspicious. About 13% of people sleep this way.
- The Spoon: This generally requires 2 sleepers. It’s commonly referred to as cuddling. Researchers say it reduces stress and helps you go to sleep faster.
Material adapted from WebMD15https://www.webmd.com/sleep-disorders/ss/slideshow-sleep-positions
Let Your Light So Shine
Hundreds of years ago, our ancestors simply went to bed when it got dark. Thomas Edison and his team of innovators changed the world with the invention of the incandescent light bulb.
Although the light bulb is designed to produce light, only 10% of its energy goes toward making a dark world more visible. The other 90% of the energy generates heat.
Compact fluorescent light (CFL) bulbs, on the other hand, are nearly four times as energy efficient as incandescent bulbs.
Swapping one incandescent light bulb with a CFL one may save 150 pounds of carbon dioxide per year. CFLs use ⅓ of the electricity, lasts nearly 10 times longer as incandescent bulbs, and produce the same amount of light.
Now that’s one bright idea.
Tip adapted from WWF16https://www.worldwildlife.org/pages/green-tips
Share the Wealth of Knowledge!
Please share this market update with family, friends or colleagues. If you would like us to add them to our list, simply click on the “Forward email” link below. We love being introduced!
If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
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 U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.
The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
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.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.
Headquartered in Newport Beach, California, MGO Wealth Advisors, LLC is a very different kind of investment management firm. more >>>
References [ + ]