The 1% Market Move: 11/20/2018

The Bottom Line
  •  S&P 500 down –1.82%
  • Stoxx Europe 600 down –1.14%
  • Shanghai Composite Index down –2.13%
So What Happened?

The stock market continued its broad sell off today, with all major U.S. benchmarks down more than 1.5%. The main reasoning behind today’s decline appears to be continuously-escalating trade tensions between the U.S. and China, which our readers will recall was the driving force behind yesterday’s dip as well. Added into the fray were new concerns over retail sales slowing in the U.S. as we enter the holiday shopping season, signs which Wall Street traders may take as an indication of the overall health of the U.S. economy. All these factors combined resulted in Wall Street staying cautious today.

The morning hours were impacted by continued weakness in the technology sector. Specifically, fresh concerns that future iPhone sales may not be as bountiful as Wall Street analysts expect led Apple to go down -4.0% yesterday and another -3.6% today. The tech giant is now down -24% from its closing high of $232.07 per share in early October. Given Apple’s status as one of the largest companies in the world, this drop has had a sort-of “contagion” effect on the rest of the tech industry, as the NASDAQ Composite index fell -1.70% today. Despite this month-long slump, however, Apple stock has still notched a positive return year-to-date.

As advisors we are certainly sensitive to the psychological component market volatility has on investors. Although it may not feel so, it is actually normal for the market to take periodic dips – in fact, since 1980 the S&P 500 typically experiences around a -14% drop at some point during the year. That is why we reiterate the pitfalls of trying to “time” your investing decisions to when these pullbacks will occur. Refer to the chart below for evidence that, during a time of market volatility, more often than not the best thing to do is nothing.

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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.