Statistic of the Week:
For Valentine’s Day, Americans will exchange about 200 million roses. The majority of those will be coming from an area just outside of Bogota, Columbia. 30 cargo jets make daily trips from Columbia to Miami for the three weeks leading up the holiday. Last year, Columbia exported approximately 4 billion flowers to the US.
The trade deficit in the US increased significantly last year, up 12% to $566 billion. This is the highest reading since 2008. America’s exports increased to $2.3 trillion, however, imports had risen substantially to about $2.9 trillion. Of the $566 billion deficit, about $375 billion can be attributed to “the politically sensitive goods deficit with China.”
Market Moving Events:
Monday: Treasury Budget Wednesday: Consumer Price Index, Retail Sales, Business Inventories Thursday: Jobless Claims, Producer Price Index, Industrial Production, Housing Market Index Friday: Housing Starts, Consumer Sentiment
Volatility characterized last week’s trading, with major equity indices around the world erasing year-to-date gains and falling into “correction” territory. The DJIA and S&P 500 both retreated 5.1%,1 while the MSCI EAFE (representing developed international equities) dropped 6.2%.2 The S&P and DJIA are down 1.8% and 1.9% thus far in 2018,3 respectively. The 10-year Treasury, which had been largely blamed for the prior week’s pullback, finished Friday with a yield mostly unchanged at 2.83%.4 The speed of last week’s market movements is notable. Amidst over 1,000 point drops on the DJIA both Monday and Thursday,5 volatility, as measured by the VIX, spiked. With an average reading of 19.9 going back to 2010, and spending most of 2017 below 15, it’s reading Friday of 29.1 shows significantly more anxiety in the system.6 Those who read this periodical regularly will recall that we believed January’s stellar gains to be unsustainable. We are viewing February’s pullback (looking at a grand total of seven trading days) as an adjustment back to reality. While we would have preferred a more orderly pullback, and not so many headlines shouting about the number of “points” the Dow had lost, this pricing level is starting to present opportunities. We do not believe that the volatility is fully behind us, and it may take some time to repair. However, the fundamentals of both the economy and global equity market are still compelling. - Dan McElwee, CFP®
Chart of the Week: