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Compass Financial Advisors

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 Equities gave back ground last week as the S&P 500 Index returned -1.20%.  Stocks were up early in the week, but began their descent on Tuesday. News from Washington DC may have soured the markets after President Trump released Secretary of State Rex Tillerson and replaced him with CIA Director Mike Pompeo. Trade war fears rose again with reports that the President may be considering imposing tariffs on products made in China to balance the trade deficit.

 The yield curve flattened last week, as long-term bond prices were supported by easing inflation fears. Treasurys sold off in January and February on fears of higher inflation, increasing the yield on the benchmark 10-year U.S. Treasury note from 2.409% at the end of 2017 to 2.870% at the end of February, but recent economic data eased those concerns. Last week, the Labor Department said the Consumer Price Index rose 0.2% in February excluding food and energy, which was a slightly slower pace than the 0.3% increase in January, causing longer-term Treasury prices to rise.

 Following an excellent January (+5.73%) and a dismal February (-3.69%), last week the S&P 500 Index returned 3.59% recording its second best week of trading in 2018. Equities have pushed back into positive territory (+4.63% YTD) after taking investors on a seesaw ride for 2018. Trade war fears, sparked the previous week by President Trump's proposed import tariffs on steel and aluminum, softened last week after some exemptions were revealed.

 Investors were uneasy after a multitude of geopolitical events grabbed headlines last week. Treasury yields dropped Monday in the wake of the Italian election and continued uncertainty surrounding trade rhetoric out of Washington. The unrest following the resignation of economic advisor Gary Cohn along with European Central Bank President Mario Draghi's dovish statements drove Treasury yields even lower as investors fled equities. After much anticipation, President Donald Trump signed off on tariffs for steel and aluminum late Thursday with the terms softening the impact for U.S.

Bob Carey, Chief Market Strategist at First Trust Advisors L.P., discusses the latest developments in the market and takes a look ahead. 

  View from the Observation Deck  

 Stocks dropped for the week after President Trump announced new steel and aluminum tariffs, instilling fears of a potential trade war, and Fed Chairman Mr. Powell reiterated to congress a gradual increase in short-term interest rates. Investors worry rising inflation from new tariffs and higher growth from the recent tax cuts could cause the Federal Reserve to move faster on raising short-term interest rates. In economic news, the labor market displayed further signs of tightening with initial jobless claims falling to 210,000, the lowest level since 1969.

 Investors fled into bonds on Thursday last week, as President Donald Trump announced plans to institute import tariffs on steel and aluminum of 25% and 10% respectively. U.S. Treasurys quickly reversed those gains on Friday as traders and strategists expressed worries about rising prices and inflation. The ISM Manufacturing Index rose to the highest level since 2004, coming in at 60.8 in February, well above the consensus expected 58.7. Generally speaking, levels higher than 50 signal expansion, while levels below 50 signal contraction.

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Securities offered through Harbour Investments, Inc.,
member FINRA/SIPC. http://www.finra.org/
http://www.sipc.org/about-sipc

Investment Advisory Services offered through
Compass Financial Advisors, LLC,
a registered Advisor. 
Compass Financial Advisors, LLC &
Harbour Investments, Inc.
are separate entities.

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