The Dow Jones, Nasdaq, and S&P 500 all saw substantial declines for the first time in 2018 during the first few days of February.
While these losses can be alarming due to the sheer size of the point changes on the indexes it is worth keeping in mind that as of this writing (Feb. 5, 2018) we are not yet in correction territory (correction is defined as a 10% decline). The major indexes are fluctuating between 4 and 6 percent declines since the beginning of the month.
The question remains if the current downtrend is indicative of an upcoming broader market move? It is easy to find arguments on both sides of the aisle to support a bullish or bearish position.
From a fundamental standpoint, the US Economy added over 200,000 jobs based on the Bureau of Labor Statistics January Report. This beat consensus estimates of 180,000 additions to non-farm payrolls. This is good news for those looking for employment.
But the surprise inside the report showed that wages had risen 2.9 percent on an annual basis, which is the most since 2009. While certainly good news for individuals involved or entering into the labor market this does put pressure on corporations to absorb these costs.
U.S. Bonds saw the 10-year Treasury yield cross the 2.70 percent threshold that had been a point of resistance and top out as high as 2.83 percent in the first few days of February.
As bonds become more and more attractive to investors we can expect pullbacks away from pricey equity markets. This news comes amid expectations of interest rate hikes from the Federal Reserve in the coming months.
As a reminder 2017 saw a historically low level of volatility across the broader markets. With the VIX hitting record lows several times throughout 2017. The current uptick in volatility is more reminiscent of what was experienced in 2015 and 2016.
What does all of this mean for your financial plan?
Primarily, that is always contingent on your unique situation and timeline. If you are unsure or have questions, please contact your financial advisor.
* This material is for education and information purposes only. Any opinions expressed in this commentary are as of the date of publication and are subject to change. This material should not be relied upon as a forecast or investment advice regarding any investment or the markets in general, nor is it intended to predict or depict the performance of any investment. Past performance in not indicative of future results. Tandem Financial, is a division of Capital Markets IQ, LLC. More information can be found at www.capitalmarketsiq.com