Geopolitical uncertainty didn't dent U.S. stocks last week.
Geopolitics is the intersection of geography, economics, and politics. Last week, there were some fine examples of the ways geopolitical events can create uncertainty. Barron's reported:
"President Donald Trump began the week suggesting that a trade war with China was on hold, before later ordering his administration to explore penalties on imported automobiles. The president also canceled talks with North Korea. Italy's bond market melted down following the emergence of a Euroskeptic government, while Turkey's lira tumbled over concerns that President Tayyip Erdogan would take control of its central bank, raising concerns about emerging markets."
Uncertainty caused major indices across Europe to finish lower last week. A majority of Asian-Pacific indices moved south, too, as did Canadian and Mexican indices. Despite pessimism elsewhere, investors in the United States remained unfazed and major U.S. stock market indices finished the week higher. The Standard & Poor's (S&P) 500 Index was up 0.3 percent.
The strong performance of U.S. markets last week was remarkable because the S&P 500 moved higher on news that would seem to inspire uncertainty. It was also remarkable because U.S. stocks gained less when S&P 500 companies reported first quarter profits were better than expected.
First quarter's earnings season - when companies report how profitable they were during the first quarter - is almost over. A majority of S&P 500 companies did better than expected, according to FactSet. However, companies with stronger than expected earnings saw share prices increase 0.2 percent on average, less than share prices increased last week.
During the past five years, companies with higher-than-expected profits have realized share price gains of 1.1 percent.
|
Data as of 5/25/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
0.3%
|
1.8%
|
12.7%
|
9.0%
|
10.4%
|
7.0%
|
|
Dow Jones Global ex-U.S.
|
-1.1
|
-1.6
|
8.9
|
2.5
|
3.5
|
0.0
|
|
10-year Treasury Note (Yield Only)
|
2.9
|
NA
|
2.3
|
2.1
|
2.1
|
3.9
|
|
Gold (per ounce)
|
1.2
|
0.5
|
3.7
|
3.2
|
-1.1
|
3.7
|
|
Bloomberg Commodity Index
|
0.6
|
3.1
|
8.6
|
-4.0
|
-7.2
|
-8.3
|
|
DJ Equity All REIT Total Return Index
|
2.4
|
-4.3
|
0.1
|
5.7
|
6.3
|
6.5
|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
