Weekly Investment Newsletter
By: Kevin Dombrowski
Market Overview
It was another choppy week for the stock market. After a strong Monday, stocks tumbled. In fact, from just Tuesday to Thursday, the S&P 500 decreased by more than 3.5%. 

In February, we saw all major global asset classes (other than cash) fall for the first time in two years. US Real Estate was hit particularly hard in February as the MSCI REIT index fell 7.7%. US Stocks, represented by the S&P 500, went down, then up, and then down again ending 3.7% down for the month.   

February was the largest monthly fall in the stock market since January 2016. Long term investors need tenacity and grit to ride out such volatility
Inflation is Coming
Wall Street is expecting inflation in 2018. The Fed’s new chairman, Jerome Powell believes inflation is moving up to a 2% target Why is this a big deal? With such a robust job market, unemployment at a 17-year low, solid consumer spending, and a tax plan that decreases Uncle Sam’s share of corporate profits, why is there such volatility in the stock market? This is partially because of the expectation of wage growth due to inflation (which has basically remained stagnant from 2008 thru 2016 in real terms). With the economy doing well, investors are worried that higher wages could cut into corporate profits. Still, the Federal Reserve and most of Wall Street expects this to largely be a non-event, as expressed by Powell, who on Tuesday reiterated that the Fed expects to move to its target despite any short term volatility in the market

What does this mean for you? Rising rates typically cause the price of current bonds to decrease. However, if you are an investor searching for income sources, these rising rates may also provide opportunities for increased income. At MainLine Private Wealth, we monitor the markets closely to ensure our clients’ portfolios are carefully allocated for ongoing changes in the market, including inflation.

Government Borrowing to Increase
Federal spending increases paired with the recent tax cuts are causing the federal government to increase its borrowing. Last week provided evidence for this with roughly $258 billion of new Treasury issuance The markets reacted to this new supply by increasing yields on Treasury Notes. In fact, yields on 2-year Treasury notes rose to a ten year high of just over 2.25% It is highly likely that bond yields will continue to rise in an environment with continued economic growth, rising inflation expectations, and the Federal Reserve’s tightening monetary policy

Gratitude Leads to Success
Does a sense of gratitude decrease stress or do low levels of stress make someone more likely to express gratitude? Researchers have found that individuals who practiced mindfulness reported feeling more gratitude for what they currently have and enjoy benefits like increased attention and focus, increased clarity and perception, better relationships with colleagues, and better brain activity. On average, individuals that practice gratitude have better workplace and personal outcomes, leading to higher levels of success.  
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