While last week didn’t have the blockbuster appeal of headline-grabbing economic news, it may have provided even more valuable context to the current market environment. It was a choppy week for the major stocks, with the S&P 500 finishing the week with a small gain of 0.39%. Within the large cap equity index, the rally in the consumer discretionary and technology sectors continued (1.17% and 2.00%) with additional participation from communications services (1.16%). The biggest laggard among sectors came from the energy space with a loss of -6.80%. Other trailing parts of U.S. large caps included the cyclical sectors of materials and real estate (-1.29% and -1.32%). When expanding beyond the domain of broad domestic large cap stocks, other equity subclasses had similar choppiness. The NASDAQ benefitted from its tech-heavy composition and ended the week with a 2.18% return. U.S. small cap stocks joined in on the rally and outperformed their large cap counterparts (1.96%). International and emerging market equities ended the week on separate sides of the gain/loss columns; with developed markets down on the week (-0.23%) and emerging markets notching a gain (0.97%). Driving the up and down week for equities was a volatile week in the bond market, which saw bond yields end the week higher and the core bond index closing Friday with a weekly loss of -1.04%.
While no investor would like to see down markets, they are unfortunately an unavoidable part of the market cycle. In periods of prolonged down markets, it is easy to focus on your declining portfolio balance rather than seeking opportunities in other areas of your encompassing financial plan. A weak market like we have experienced year-to-date can create opportunities for several tax strategies such as tax-loss harvesting and Roth conversions. We want to discuss how individuals like you can reap the most benefit from completing ‘discounted’ Roth conversions.
Following a year of economic instability, it appears that many of us are turning our attention to something that’s been around for decades, but has recently piqued national interest – inflation. In fact, a recent study found that people are Googling the word “inflation” at a rapid rate, with a peak not seen since 2008.