It’s hard to believe it’s already July. I recently moved to the far western suburbs of Chicago surrounded by farmland and the corn is already tasseled out, let alone “knee high by the Fourth of July.” Back-to-school ads are starting to pop up and before we know it summer will have passed us by.
We have also entered the second half of 2018, which allows us to consider what happened during the first six months and ponder what is yet to come.
For the U.S. stock market, it was a bit of a mixed bag. The year started off strongly, only to see those gains quickly wiped out by the middle of February. From there, the market found its footing for the next couple of months before seeing the February lows tested in late March and early April. From there, the market has been on a general, albeit volatile, upward trend. However, we have yet to match the highs of late January and the intermediate highs of February and March seem to be resistance points.
The broad market indexes posted gains in the second quarter and being down (excluding technology) in the first quarter. The Dow Jones industrial average and S&P 500 index rose 0.7% and 2.9%, respectively, in the April to June period. The tech-heavy Nasdaq composite has added 6.3%, its strongest three-month period of trading since the first quarter of 2017.
Year-to-date, through the end of June, the Dow is down 1.8% (excluding dividends) while the S&P 500 is up 1.67% and the Nasdaq has gained 8.8%.
AAII Weekly Survey Question
Looking forward to the rest of 2018, amidst rising volatility stemming from a brewing trade war between the U.S. and potentially the rest of the world, rising inflation and rising interest rates, just to name a few, we wanted to know how our readers felt about the rest of the year. So last week’s survey question asked:
How well will the S&P 500 index perform in the second half of this year?
Here are the results:
In all, 1,894 readers participated.
The majority of respondents—72%—believe the S&P 500 will post a gain for the last six months of 2018. Thirty-five percent believe the gains will be modest—less than 5%—while another 31% think the gains will be between 5% and 10%. Six percent are very optimistic in the market, thinking the large-cap index will add more than 10% before the end of the year.
For the 28% that think the S&P 500 will be down the rest of the year, most see a decline of no more than 10%. Twelve percent of all respondents think the index will be down less than 5% by December 31, while 11% think the decline will be between 5% and 10%. Only 5% of our readers think the S&P 500 will see a decline of more than 10% during the second half of the year.
Weekly Special Question
Having asked their general temperament when it comes to the U.S. stock market for the rest of the year, last week’s special question wanted to get an idea of which asset classes our readers think will be most attractive for the rest of 2018. So we asked:
What do you think will be the best-performing asset class (stocks, bonds, commodities, etc.) or sector/industry for the rest of the year?
In all, we received 320 responses.
Given the results from our weekly survey, it is probably not surprising that the majority of readers—71%—see stocks as the strongest asset class for the rear of 2018. Within this group, our readers see the technology and energy sectors as being the top performers for the second-half of the year.
Outside of individual stocks, the asset class that received the most love from our readers was commodities. Nearly 15% of respondents believe that this will be the best-performed asset class for the rest of the year.
Here is a sampling of the responses we received as to what will be the top-performing asset class for the last six months of 2018:
- “Not a clue.”
- “Technology stocks will perform best.”
- “Depends on the ‘trade war.'”
- “I believe that commodities will be the best performing asset class.”
- “Don’t know—tariffs are the story.”
- “Incredibly, it looks like bonds may remain the ‘safest’ asset class in view of all the uncertainty surrounding trade tariffs, even with the prospect of rising interest rates.”
- “With rising interest rates, bank stocks should benefit.”
- “Your guess is as good as mine.”
Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.