Long-term bull market tries to hold on

After the most turbulent month in years, the S&P 500 squeaked out a positive week, roughly up 2%. This puts the index up about 1.5% since the start of the year. Volatility was to be expected as rising Federal Reserve rates made cash more expensive to invest, not to mention geopolitical drama from the U.S. to Saudi Arabia, shaking oil markets. Bad news aside, economic fundamentals remain strong. Unemployment is the lowest in decade and corporate America has enough cash buy back almost $1t of stock by next year and is projected to do so.^1

As a reaction to trade threats, the world flocked to the U.S. dollar, shrinking the relative value of international assets, includes most currencies, stocks, and bonds. This sent foreign equities down for the year; the iShares MSCI EFA index is down 12.4% for the year. If you have a properly diversified portfolio, then you certainly felt the decline.

Technically speaking, there’s still chance for recovery in most equity indexes. U.S. stocks remain within a trading range and is likely to go higher over the intermediate term^2. Foreign stocks also have a chance to recoup some losses as it took most of the beating in October^3.

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Sources:

^1 Ft.com 11/9/18: "Peak US buybacks arguably here but still room to run"