Global stocks declined last week as the Trump administration’s rhetoric and proposals regarding global trade continued to concern investors. OPEC indicated it would increase oil production less than expected, and oil prices climbed between 3% and 5% depending on the market. General Electric (GE) was removed from the Dow Jones Industrial Average after months-long underperformance. GE was the last of the original companies still included in the index, dating back to its formation in 1896. It will be replaced by Walgreens Boots.
The S&P 500 dropped 0.9%. The global MSCI ACWI dropped 1.1%, and the Bloomberg BarCap Aggregate Bond Index was down a negligible amount.
Key points for the week
- Further risks of trade disputes pushed stocks lower.
- Oil prices rose after OPEC’s production increases were lower than expected.
- General Electric was removed from the Dow Jones Industrial Average.
The trade dispute between the U.S. and China continues to worsen. So far, the effect on consumers has been minimal because the Trump administration has targeted intermediate goods purchased primarily by businesses. Eventually, however, those costs will be passed on to the consumer. With the proposal of additional tariffs on $200 billion in Chinese goods and possibly as much as $400 billion if China retaliates, consumers will likely see price increases in consumer products ranging from clothing to electronics. One consumer product has already seen a price hike — washing machines have risen 17% since January.
The accompanying chart shows a list of consumer goods that could see price increases going forward. A possible 10% tariff could be placed on the next round of products, which include furniture and electronics. In particular, smartphones could be the most significant target as 70% of cell phones are assembled in China.
Many investors have wondered where the bear has gone during the long bull market that started in 2009. We may have tracked it down, at least temporarily. A bizarre event occurred in Lake Tahoe last week as a bear found itself stuck inside a Subaru Outback. No one quite knows how the bear got into the vehicle, but they do know it was trapped — the interior was so torn up, all possible exits were blocked. A brave Placer County deputy broke the window to help the bear escape.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.