US Capital Markets Review 10/26/18

This week was a rotten one for the US capital markets as all major indicies were in the deep red – the S&P 500 was down -3.9% and the Russell 2000 and Nasdaq were both down -3.8%. It was a market shellacking. Mid-cap stocks fared worse than small and large cap stocks, and it was an equally bad week comparing growth vs value stocks.

In looking at sector performance, energy got slammed at a weekly loss of -7.1%, followed by industrials at -5.6% and financials at -5.2%. Not surprisingly, the VIX spiked up +21.5%. Gold did well at a weekly gain of +0.6% and closed at $1,234 per ounce. Silver was flat for the week, and closed at $14.71 per ounce. Oil struggled and posted a weekly loss of -2.3%, closing at $67.67 per barrel (West Texas Intermediate).

In economic and political news, US gross domestic product for Q3 came in at 3.5%, which beat expectations of 1.6%. But this good news couldn’t halt the huge market volatility, as earnings season has been slightly weak, and forward guidance has been tempered. Increased attention to political activities due to upcoming mid-term elections, as well as indicators in a housing market slowdown (a leading indicator for the overall markets), have the market on edge. The news also focused on the increasing federal deficit a lot this week, which is a big concern to many investors looking at the long term solution to the federal debt load. Large market swings also create more market swings as investors react to the volatility.

Cryptocurrencies held firm this week. Bitcoin, Steem and EOS were all fairly flat, and are currently at $6,400, $0.79, and $5.40, respectively.

Overall, the US capital markets remain healthy, though the year-to-date gains have been wiped away over the last couple of weeks. Given the uncertainty in the political arena, housing market woes, and federal debt issues, it does make sense to examine putting more hedges in lower downside risk.

Good luck,

Brian