Stocks ended higher on Friday, as a late-day rally pared a weekly decline as investors’ fear over potential trade wars subsided amid speculation that President Trump’s pledged tariffs may not disrupt global growth. President Trump said he will impose tariffs of 25% on steel and 10% on aluminum, yet his negotiating tactics can often reverse as subsequent events play out. Earlier, the threat of tariffs sparked prospects for retaliatory tariffs on American exports. Stocks also slid last week after Fed Chairman Jerome Powell addressed Congress, acknowledging the continued strength of the economy and citing healthy labor market dynamics. He also hinted that the FOMC may raise interest rates four times this year, instead of the three rate hikes the Fed forecast in December.
For the week, the S&P 500 fell -1.98%, the Dow Industrials lost -3.05% and the MSCI EAFE (developed international) declined -2.86%.
What We’re Reading
Kim Jung Un Meets South Koreans -- Market Watch
NAFTA Concessions? -- Reuters
Chart 1 shows the average monthly returns for the S&P 500 over the last 10-, 25-, and 40-year periods. There is a lot to digest in this chart, but we will hone in on the main takeaways. While the average S&P 500 return is positive in all months except September over the last 40 years, returns have not been consistent over time. As an example, for the last 10 years there are three separate months with a negative average return. Additionally, historical returns do not track evenly over time - for the 40 year horizon, there have been negative returns in each month at least once, ranging from - 6.06% to -21.64%.
This is also evident in the historical returns for February, where this month's 4.45% loss occurred despite the historical averages being positive in each of the past 10, 25 and 40 years. In our view, the key investor takeaway from this chart, and when looking at other historical returns, is to maintain a long-term outlook and invest consistently over time. By avoiding the trap of timing the market, and staying diversified across broad asset classes, investors may limit downside risks and remain better positioned to take advantage of market recoveries, which has not happened since August 2011.
Some materials are chosen by the Cetera Investment Management team and summarized by Jason Vitucci who is not affiliated or registered with Cetera. Cetera Investment Management provides investment management and advisory services to a number of programs sponsored by First Allied Securities and First Allied Advisory Services. Cetera Investment Management individuals who provide investment management services are not associated persons with any broker-dealer. International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.