Stocks ascend again.

February saw a continuation of January’s positive stock market returns. Read more to find out what happened and what it may mean for you.

What happened.

Holding stocks paid off in January and this continued into February. Once more, US small-cap stocks led the charge, rising 4.4% (S&P 600 Index) with large-caps following suit, up 3.2% (S&P 500 Index). Advances in international stocks were not as pronounced with developed-market stocks increasing 2.6% and emerging-market stocks progressing 0.22% (MSCI EAFE and Emerging Market indices). Volatility was muted for the second month in a row. The S&P 500 moved by more than +/- 1% on only two days in February. Bonds finished the month essentially flat, edging down -0.06% (Bloomberg Barclays US Aggregate Index).

Why it happened.

 

Investors again kept their eyes on trade news, Federal Reserve policy, and signals about global economic growth. The largest single-day drop of the month (-0.92%) occurred on February 7th when the White House confirmed that a meeting between President Trump and China’s President Xi Jinping would not occur prior to a looming March 1st tariff deadline. This was shortly followed by the largest single-day jump of the month (1.3%) on February 12th when President Trump suggested he might delay planned tariff increases past the March 1st deadline. The increases were delayed.
The Federal Reserve continued to suggest that it was not in a rush to increase interest rates. The Fed Governor, Jerome Powell, said this was because of “conflicting signals” in the economy and potential slowing global economic growth ahead. While US jobs data remained solid, consumer confidence and manufacturing data were not as good. Reports on the continuing slowdown in China and yet more uncertainty about Brexit also fueled the Fed’s concerns. In this month’s sidebar, we look at why worries about Brexit and tariffs move the markets.

What this means for you.

Financial Engines builds a portfolio that is personal to you, considering your situation, goals and tolerance for risk. While February was a positive month, it’s important to understand how comfortably you can stomach the inevitable ups and downs of markets and set your portfolio’s risk accordingly. Your portfolio will probably have seen positive returns this month. The more aggressive the portfolio—because you’re further from retirement or have a higher risk tolerance—the better it will likely have done. As always, it’s important that we know as much as possible about your personal situation and risk preferences. Please let us know of any changes by logging into your Financial Engines account or calling one of our advisors.

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