Stocks close a volatile month down.

What happened.

August was a volatile month in stock markets around the world.  Large-cap stocks, measured by the S&P 500 Index, moved by over +/- 1 percent on 11 of the 22 trading days.  By the end of the month, all the major classes of stocks had fallen.  At home, large caps were down by 1.58 percent and small caps by 4.51 percent (S&P 500 and 600 indices).  International stocks were also down: developed-market stocks fell by 2.59 percent and emerging-market stocks by 4.88 percent (MSCI EAFE and Emerging Markets indices).  Interest rates were also down for the month, boosting bond prices, which rise when interest rates fall.  The Bloomberg Barclays Aggregate Index rose by 2.59 percent.

Why it happened.

One word defined the month in the markets:  trade.  As threats of tariffs, and then signs of international cooperation, bounced back and forth between the US and China, stocks lurched up and down.  In this month’s sidebar, we look at the effects of tariffs on consumers and companies.  Stocks respond negatively to the prospect of tariffs because they may eventually harm companies’ earnings.  On days when the news reported that tariffs were more likely, stocks fell, and on days when negotiations seemed likely, they rose.

Other factors affected markets in August.  The prospect of a global economic slowdown unsettled stock markets.  But signals that central bankers around the world would respond by lowering interest rates to strengthen their economies helped markets.  These signals also led interest rates to decline to unusually low levels:  the US Treasury 30-year yield (the rate the US government must pay to borrow for 30 years) fell to a record low.  Meanwhile, there was some solid data on the US economy, with unemployment at record lows and continued strength in consumer spending providing support for the overall economy.

What this means for you.

At Financial Engines, we build a portfolio tailored to your situation and preferences.  Your portfolio will probably have seen a negative return in August.  The higher the risk of the portfolio—which means a higher share of your portfolio invested in stocks—the more negative the return will have been.  With a lower-risk portfolio, you will have been less affected by the fall in stocks and will have benefited more from the rise in bonds.  It’s always good to use months such as August to make sure you’re comfortable with the amount of risk you’re taking in order to achieve your retirement goals.  What will happen in markets is unpredictable, but you can choose how much risk you are willing to take with your portfolio.  Log into your account or speak to your advisor to reassess how much risk you’re taking and make any necessary adjustments.

©2019 Edelman Financial Engines, LLC. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Edelman Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Advisory services are provided by Financial Engines Advisors L.L.C. Call (800) 601-5957 for a copy of our Privacy Notice. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2019 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.
An index is a portfolio of specific securities (common examples are the S&P, DJIA, NASDAQ), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance does not guarantee future results.
AM938226