Markets Continue Negative Trend

The investment markets in March continued the negative trends of February.

The biggest trend, of course, is negative returns for the major stock indexes. The S&P 500 slid 2.74% in March, fell 7.81% from its Jan. 26 peak to wipe out January’s strong gains and now has a year-to-date loss of 1.00%.

The Dow Jones Industrial Average did even worse, losing 3.34% for March and 1.94% for 2018. But the Nasdaq 100 fared the worst of the big three indexes, losing 4.08% for the month. The Nasdaq’s returns earlier in the year were so strong, however, that it still had a positive 2.98% return for the year as of March 30.

International markets generally did better than the U.S. indexes in March and for the year to date.

Mexico had positive returns for both March and the year to date. Brazil lost only 1.32% in March and is up 10.95% for the year to date. Japan also is bucking the trend, returning 1.25% for 2018 so far and losing only 0.64% in March.

The EAFE international stock market index lost 0.84% in March and 0.90% for the year to date. It is down 7.40% from the Jan. 26 peak. Emerging markets have a positive 0.54% for March and 2.46% for the year to date.

Commodities also are holding up. Broad-based commodities returned 2.29% for March and 2.23% for the year to date. Oil was up 5.82% for March and 8.99% for the year. Gold was up 0.63% for March and 1.73% for 2018.

Some of the more interesting trends are occurring within the U.S. stock indexes.

Small company stock indexes are doing much better than the large company indexes. The Russell 2000 was up 1.22% for March and 0.18% for the year to date. It fell 4.64% from its Jan. 26 high. The S&P 600 rose 1.99% for March and 0.57% for the year but dropped 3.87% since Jan. 26.

Growth stocks generally are doing better than value stocks and than the broad indexes. For example, the S&P 500 Growth index is down 2.97% for March and 6.29% since Jan. 26. It still is up 1.81% for the year to date. The S&P 500 Value index beat Growth in March, losing only 2.01%. But the Value index is down 9.19% since Jan. 26 and 3.05% for the year to date.

Bonds made a bit of a recovery in March. Long-term treasury bonds rose 2.86% for the month but still are down 3.51% for the year to date. The Total Bond Market index was up 0.69% for March but is down 1.59% for the year to date.

The Data

Manufacturing data continue to be strong. The following offer examples.

The ISM Manufacturing Index declined a little to 59.3 from 60.8. But last month’s number was a 14-year high. This month’s number is a strong one, and the components of the index were very strong.

The PMI Manufacturing Index increased a little to 55.6 from 55.3. Most of the index components were strong, with business expectations coming in at a three-year high.

Factory Orders continued the recent trend of the hard economic data finally reflecting some of the strength in the surveys and anecdotal reports. Orders rose 1.3%, following a 1.4% decline last month that was revised to 1.3%. Even better, capital goods orders, which reflect business investment, rose 1.4%.

The non-manufacturing sector slowed a little but still is growing smartly. The ISM Non-Manufacturing Index came in at 58.8 compared to last month’s 59.5. The report was strong across the board, with mining being the strongest sector.

The PMI Services Index also declined a little, to 54.0, from 55.9. Most components of the index were strong, and hiring was especially robust.

Friday’s Employment Situation reports are likely to be strong again, based on the lead-up data. The ADP Employment report had another strong month. It reported 241,000 new private sector jobs, and last month’s number was revised higher to 246,000 from 235,000.

New unemployment claims declined 12,000 last week to set a new 45-year record low of 215,000. But claims rose 24,000 this week. That still leaves the total near historic lows and below the average for 2017.

Personal Income had a nice gain of 0.4%, and that included a 0.5% increase in wages and salaries. That marks four straight months of solid increases in wages and salaries. Consumer spending rose only 0.2%, matching last month’s increase.

Inflation, as measured by the Fed’s preferred PCE Price Index, rose only 0.2% for the month and 1.8% over 12 months. The Core Price Index gained 0.2% for the month and 1.6% over 12 months. Inflation is inching toward the Fed’s goal, but there’s no reason for the Fed to be concerned about out-of-control inflation.

Consumer Sentiment, as measured by the University of Michigan, came in at 101.4, which is a 14-year high for the month-end reading.

The Markets

The S&P 500 rose 1.44% for the week ended with Wednesday’s close. The Dow Jones Industrial Average gained 1.75%. The Russell 2000 returned 1.23%. The All-Country World Index increased 1.07%. Emerging market equities added 1.29%.

Long-term treasuries lost 0.30% for the week. Investment-grade bonds gained 0.13%. Treasury Inflation-Protected Securities (TIPS) returned 0.20%. High-yield bonds fell 0.46%.

On the currency front, the dollar was unchanged.

Energy-based commodities lost 0.79% for the week. Broader-based commodities returned 0.04%. Gold rose 0.63%.

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