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The 1% Market Move: 11/7/2018

The Bottom Line
  • S&P 500 up +2.12%
  • Stoxx Europe 600 up +1.06%
  • Shanghai Composite Index down -0.68%
So What Happened?

Today’s +2.12% gain in the U.S. marks the first +/- 1% move of the week, as both Wall Street and Main Street took a hiatus the past two days in anticipation of Tuesday’s mid-term elections. Democrats won control of the House of Representatives while the Republicans held on to their majority in the Senate. The stock market has a tendency to detest any and all forms of uncertainty, so the fact that Tuesday’s elections went as forecasted kept the market at bay. With today’s push the S&P 500 now sits at +5.25% year-to-date.

It seems counterintuitive the stock market, given its distaste for uncertainty, would respond favorably to a divided Congress – a split which all but guarantees continued gridlock in D.C. Politics aside, the thinking is that a fragmented Congress creates a kind-of “Goldilocks” scenario for the economy that: 1) increases the odds the tax cuts will not be repealed; and 2) lowers the odds of new fiscal stimulus out of Washington. This, in theory, could keep the economy humming along at its currently strong pace, while at the same time not growing so fast as to entice the Federal Reserve to hike interest rates (something the market has been on edge about all year).

Ultimately, it is likely today’s results will be short-lived given upcoming events such as the economic summit between the U.S. and major world players, trade talks between the U.S. and China, Federal Reserve meetings, and the tail-end of Q3 earnings season. The stock market has a famously short-term memory (i.e. “what have you done for me lately?”) and so as always, we urge our readers to keep both their eyes and portfolios focused on their long-term goals.

Disclosures:

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The S&P 500 is a market capitalization weighted index of 500 leading U.S. companies and one of the most common benchmarks for the broader U.S. equity markets.

The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The Nasdaq Stock Market. Launched in 1971, the NASDAQ Composite Index is a broad based Index. Today, the Index includes over 3,000 securities, more than most other stock market indices. The NASDAQ Composite is calculated under a market capitalization weighted methodology index. To be eligible for inclusion in the Composite the security’s U.S. listing must be exclusively on the Nasdaq Stock Market (unless the security was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing), and have a security type of either: American Depositary Receipts (ADRs); Common Stock; Limited Partnership Interests; Ordinary Shares; Real Estate Investment Trusts (REITs); Shares of Beneficial Interest (SBIs);
Tracking Stocks
Security types not included in the Index are closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities.

If at any time a component security no longer meets the above eligibility criteria, the security is removed from the Composite Index.

The Stoxx Europe 600 is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 17 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

The Shanghai Composite Index is a market capitalization weighted index made up of all the A-share and B-shares that trade on the Shanghai Stock Exchange.

Past performance is not an indication or guarantee of future results. Investing in securities involves risks, including the potential loss of all amounts invested.

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