After a tenuous first quarter, the global stock markets produced mixed results.  On the winning side: U.S. stocks proved superior to international stocks and emerging markets, small and mid-sized U.S. companies outpaced large capitalization multinational companies, and growth companies outperformed value.  After nine consecutive positive quarter returns, the Dow Jones industrial Average posted a negative return in the first quarter, but began a new winning streak in quarter two with a 1.26% gain.  In addition to the Dow, the NASDAQ Composite gained 6.61% and the S&P 500 increased 3.71% this quarter.  International stocks did not fare as well with potential tariffs looming.  The two major international indices (MSCI Emerging Markets and MSCI EAFE) were down 7.96% and 1.24%, respectively, for the quarter.

In the bond market, prices rallied after the benchmark 10-Year U.S. Treasury bounced off a 3.11% high yield and returned to its comfort zone in the high two percent range, but still left interest rates higher for the quarter.  The benchmark 10-Year U.S. Treasury yield moved up 11 basis points to yield 2.85%.  The yield curve continued to flatten.  Owning bonds in your portfolio will not hurt you, nor will they help your assets grow.  Their value will either be an insurance policy against a stock market correction or a source of liquidity and price stability.

A strong U.S. economy gave the Federal Reserve the confidence to raise interest rates again in June and signal two further hikes to come this year, followed by three more next year.  In contrast, after a string of disappointing data and still low core inflation, the European Central Bank announced that interest rates will not be going up until at least the summer of next year, although they did confirm that Eurozone quantitative easing would come to an end by the end of this year.

Unfortunately, long-term investing does not result in values moving in a straight line higher.  The market and portfolios go through periods of varying performance.  The best defense against market volatility is proper diversification.  Structure your portfolio for multiple objectives (growth, income and principal preservation) in allocated amounts that align with your risk tolerance and long-term financial goals.  The right asset allocation allows your portfolio to weather all environments and will keep you invested for the long haul.




Given President Trump’s deep-seated belief that the U.S. is getting shortchanged on trade, combined with the executive branch’s enormous flexibility around trade policy, we do not see trade policy risk diminishing, at least in the foreseeable future.  Indeed, with the number of potential catalysts in the next month or so, we could see it escalate.

What trade inflection points should investors be watching this summer?

  • June 12: North Korea summit in Singapore and the launch of the new office for the American Institute in Taiwan.
  • June 15: The White House deadline for finalizing 25% tariffs on $50 billion of Chinese goods, as part of the U.S. Section 301 investigation into China’s use of American technology.
  • June 20: Europe to impose retaliatory tariffs on the U.S.
  • June 22: Deadline for public comments on the U.S. Section 232 investigation into auto imports posing a national security risk and therefore subject to tariffs.
  • June 30: White House restrictions on Chinese investments in the U.S. were announced.
  • Mid-to-end-of July: NAFTA agreement (but don’t hold your breath).
  • July 1: Mexican presidential election and its effect on NAFTA 2.0 negotiations.
  • July 1: Canadian retaliatory tariffs expected.
  • July 10: White House announces another round of tariffs on $200 billion of Chinese goods.


Investors should be mindful of various inflection points on trade over the coming months.  While a de-escalation of tensions is possible, there appears a greater risk for escalation, at least in the short term.



Phone: (212) 675-9360 OR (732) 583-1313           July 2018