Where We Stand: Investing

HERE ARE THE LATEST numbers from the world of investing:

  • The S&P 500 climbed 1.7% in 2018’s first half, after gaining 19.4% in 2017. These figures don’t include dividends. Since the market bottomed on March 9, 2009, the shares in the S&P 500 have climbed 302%, though they remain just 78% above their March 24, 2000, peak.
  • While 2018’s first half saw the return of volatility after a notably calm 2017, the impact on market indices hasn’t been huge. Large-cap U.S. growth stocks posted single-digit gains in 2018’s first six months, while large-cap value stocks had modest losses. U.S. smaller-company stocks fared better than large-cap stocks, but there wasn’t much in it. Meanwhile, both developed foreign markets and emerging markets posted losses.
  • The benchmark 10-year Treasury note finished 2018’s second quarter at 2.86%, up from 2.41% at year-end 2017. In early July 2016, the 10-year yield hit a record low of 1.37%.
  • Short-term interest rates climbed in 2018’s first half, pushing up taxable money-market mutual fund yields to an average 1.5% and one-year certificate of deposit yields to 2.3%. Matters should continue to improve: The Federal Reserve raised its target for the federal funds rate in March, June and December 2017, and again in March and June 2018.
  • Real assets had mixed results. Oil, which finished 2017 at $60, was $14 higher six months later. Real estate investment trusts treaded water in 2018’s first half, after posting subdued returns in both 2016 and 2017. Gold, which ended 2017 at $1,305, fell to $1,254 by the end of 2018’s second quarter.
  • Bitcoin was hammered in 2018’s first half, falling to just above $6,000 from above $14,000 at year-end 2017.
  • In June 2018, the Federal Reserve projected that the U.S. economy will expand 2.8% in 2018, with unemployment dipping to 3.6% and core inflation running at 2%. Since the economic contraction of 2008 and 2009, real (after-inflation) gross domestic product has grown fairly steadily. But the pace of growth has been modest, averaging 2.1% a year over the eight years through 2017, including growth of 2.3% in 2017 and 1.5% in 2016.
  • As of 2016, 51.9% of U.S. families were invested in the stock market, up from 48.8% three years earlier, but below the 53.2% peak recorded in 2007, according to the Federal Reserve’s Survey of Consumer Finances. The survey is conducted every three years.
  • Index funds focused on U.S. stocks—both the mutual-fund and the exchange-traded varieties—attracted $1.6 trillion in new money over the past decade, while actively managed funds saw $1.3 trillion in redemptions, reports the Investment Company Institute’s 2018 Fact Book.
  • There’s been much handwringing over whether index funds are coming to dominate the U.S. stock market. But according to the Investment Company Institute, index mutual funds and exchange-traded index funds hold just 13% of U.S. stocks, versus 16% for actively managed funds and 71% for others, including individuals, hedge funds, pension funds and insurers.

Want to get a handle on stock and bond market valuations? Check out the chapter on financial markets.

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