The US capital markets struggled this week. The Dow Jones Industrial Average fared the worst, posting a weekly loss of -2.0%, but finally halting an 8 day losing streak on Friday. Long time Dow component, General Electric Corp, was dropped from the index this week, as the company struggles to figure out its future. Surprisingly, small cap stocks outperformed large cap during the tough week. Although US stocks had a hard time, they did outperform compared to international and emerging markets.
Leading the negative news was the continued tariff drama, which continues to get closer to an all-out trade war. The VIX (fear index) jumped +15% this week, and is +25% year to date, despite the equity markets still being positive for the year.
Oil was up big on Friday, and posted a gain of +7.0% for the week. OPEC announced increases in production, which would normally be a bad thing for oil prices, but the lack of clarity and specific in the announcement caused the oil futures to go on a run. Gold was down -0.7% for the week, closing at $1,269 an ounce. Silver was down about the same amount, and closed at $16.48 an ounce.
Cryptocurrency markets continued to take a beating overall, and Bitcoin fell to $6,150. Steem was dragged down by the broader market, posting a weekly loss of -20% to $1.33. EOS continued to struggle and fell -22%to $8.33, which is not unexpected given its bloated market cap, which still stands at $7.8 Billion.
Despite the negatives occurring in the news, the overall US economy remains healthy – unemployment is low at 3.8%, the consumer confidence index continues to climb higher and core inflation is rising but not too quickly. There are risks on the horizon, including the overall debt load of the US, unknown impacts on rising interest rates on the housing market, and possible trade wars. Despite these, I remain cautiously optimistic about US capital market outlook for the second half of 2018.
Thanks for reading,
Brian