Market commentary

Weekly Market Commentary September 4, 2018

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Markets continue to produce positive results without much volatility. The S&P 500 edged up 0.2% last week. The MSCI ACWI climbed 0.6%, and the Bloomberg BarCap Aggregate Bond Index dropped 0.1%. The positive results were part of strong overall performance in August. The S&P 500 rose 3.0%, and the global MSCI ACWI rose 0.6%. Bonds also rose 0.6%.

Strong months with little downside can create a desire to chase after returns. Keep in mind this market has been abnormally calm. The average July and August, since 1996, produce 12 moves in the S&P 500 of more than 1% in either direction. In 2018, there were none.

Key points for the week

  • Stocks edged higher on positive economic and trade news.
  • Core inflation, as measured by the PCE, hit the Federal Reserve’s target of 2%.
  • The U.S., Canada, and Mexico are hoping to reach a trade agreement soon.


The personal consumption expenditures (PCE) index, which is the Fed’s preferred inflation measurement, rose 0.2% in July. This led to the year-over-year PCE being 2%, matching the Fed’s inflation target. Consumer spending, which accounts for two-thirds of economic activity, increased 0.4% in July, showing a very strong economy.

Inflation remains well within the Fed’s target range, and the improving jobs environment has not created any spikes. Given the strong economic environment, our outlook is for inflation to stay at or just above 2%. The risks remain to the upside if tight labor markets or trade disputes result in prices rising faster than expected.


The U.S. and Mexico reached an agreement last week after weeks of renegotiating NAFTA’s trade terms. However, the deal still has to be approved by each country’s lawmakers. Investors responded positively to the news as markets moved higher. The new deal touched on the tariff treatment of automobile imports from Mexico, wage requirements for automotive supply chain workers, and tariff-free agricultural imports and exports.

Meanwhile, the U.S. and Canada have been in discussions on a revised NAFTA deal, which was given a deadline by the Trump administration for last Friday. After a two-hour morning meeting, the deadline was missed. We expect a deal to be reached between all three parties sometime before the end of the year.

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