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Getting Nowhere Fast

The first half of 2018 has seemed like a bit of a roller coaster ride for stocks, but values ended the period about unchanged. The Dow Jones Industrial average declined from a high of 26,616 to a low of 23,423 or 3,193 points. A 12% swing. However, we ended the period on June 29th, almost where the year began, with a modest decline of .72%. While volatility seemed high, the magnitude of the correction was fairly typical of most years.

International issues that contributed to market volatility included: termination of the Iran Nuclear Agreement, North Korean nuclear negotiations and tariff threats.

Economic and political issues impacting the first half of the year included:

  • two Federal Reserve discount rate increases

  • a Federal Government shut-down

  • the potential disruption in the pharmaceutical and transportation industries caused by disclosures from of its intent to compete in these areas

These issues developed against the background of continuing employment increases and excellent corporate earnings growth, reflecting a strong U. S. economy.

In summary, we had a lot of mixed signals during the first half of the year. The stock market responded to each based on a short term view of the expected impact. Stocks are likely to continue to respond to daily headlines and remain in a volatile trading range until we see some clarification of the issues at hand.


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