October 9, 2018

Market Highlights 3Q 2018

The Dow Jones Industrial Average finished the quarter with a total return of 9.63%, followed by the S&P 500 Index with a total return of 7.71% and the Nasdaq Composite’s return of 7.42%. All eleven sectors in the S&P 500 posted positive returns during the period. Health Care and Industrials were the biggest winners with returns of 14.53% and 10.00%, respectively. Large-cap stocks outperformed mid-cap stocks, which beat small-cap names. Specifically, the Russell 1000 Index’s 7.42% gain did better than Russell Midcap Index and the Russell 2000 Index which posted gains of 5.00% and 3.57%, respectively for the quarter. Growth stocks continued to beat their value counterparts, as the Russell 1000 Growth Index rose 9.17% compared to the 5.70% gain of the Russell 1000 Value Index over the same period. Stocks outperformed bonds, with the Barclays Aggregate Total Return underperforming all equity benchmarks with a 0.02% gain. Long-dated US Treasuries underperformed, with the Barclays Long-Term Treasury Index losing 3.00%. The US Dollar Index gained 0.70% for the quarter, while oil gave up some ground and declined 1.21%. Gold continued to decline over the period losing 5.5%.

The market and interest rates continued their climb higher in the third quarter as ongoing trade tensions pushed some emerging markets into bear-market territory. By the end of the third quarter, the US had implemented tariffs on $250B worth of Chinese goods with China implementing tariffs on $110B of US goods, which coincided with the Chinese market falling another 10% during the quarter. The US finally reached a trilateral trade agreement with Canada and Mexico, calling it the United States-Mexico-Canada Agreement (USMCA). Further abroad, the value of the Turkish lira collapsed over the quarter sparking fears of an emerging market crisis, but the lira has recovered some ground after Turkey’s central bank raised interest rates. Natural disasters continued to have devastating effects on countries around the world as wildfires, hurricanes, earthquakes, and tsunamis persisted throughout the quarter. In the US, Apple was the first company to hit the $1T valuation mark, and tension over the Kavanaugh nomination continued through the end of the quarter with the market taking little notice. The Federal Reserve raised its benchmark interest rate to a range between 2% and 2.25% in September, marking the Bank’s eighth rate rise since 2015, and the ten-year government bond yield gained 30 basis points to end the quarter at 3.06%, the first time the ten-year ended a calendar quarter north of 3% since the end of 2013.


The views expressed in this commentary reflect those of Miller Value Partners analysts as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.

©2018 Miller Value Partners, LLC

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