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Economic & Market Outlook  

September 2018

Tech stocks soared in August as the Nasdaq jumped almost 6.0%. The large caps of both the Dow and S&P also posted notable gains.

Small-cap stocks continued their year-to-date outperformance versus large-cap stocks. Growth stocks remain strong relative to value stocks.

Strong earnings growth has been the catalyst for domestic equity markets reaching all-time highs.

We expect that the equity markets will be volatile for the remainder of the year, as pending trade tariffs are adding uncertainty to the economic outlook.

A stronger U.S. dollar combined with worries over impending tariffs continues to pummel emerging market equities. Chinese stocks have been hit particularly hard.

The second quarter GDP report was quite strong. The rest of the year is expected to be considerably softer, due to fading benefits from tax cuts and stronger headwinds from trade.

Many suggest that the yield curve is pointing to an economic slowdown. The spread between two-year and ten-year treasuries has tightened to less than 0.30%, hitting its narrowest level since July 2007.

The Fed repeatedly emphasized the economy’s strength after its two-day policy meeting. It offered nothing to dispel expectations that it would raise rates in September.

Most investors still expect two more rate hikes this year but some think the Fed should pause, taking notice of the flattening yield curve and muted inflation expectations.

We favor international equities long term based on improved economic growth and attractive valuations relative to the U.S. markets.


  • This information has been compiled using data and other statements of fact derived from sources which we believe to be accurate and reliable. However, such data and other statements of fact have not been verified by us, and we do not make any representations as to their accuracy or completeness. Any opinion expressed herein reflects our judgment at this date and is subject to change.

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