U.S. Versus International
The S&P 500, an index of large U.S. companies, posted a total return of 3.4% for the 13 weeks ending June 29, 2018. U.S. stocks outperformed international for the quarter as measured by the All Country World Index ex-U.S. stocks, a representation of international stocks outside the U.S. Total return for the 13 weeks ending June 29, 2018, was -0.8%.
Threats of a tariff war between China and the U.S. continued to wreak havoc on international versus U.S. investments. International investments experienced a double whammy as the perception of slower economic growth and falling currency values hit stocks. The dominance of the U.S. in tariff discussions drove a spike in the value of the U.S. dollar. The value of international investments originally purchased in U.S. dollars shrinks as the value of the dollar strengthens.
Stocks listed on the FTSE (Financial Times Stock Exchange, or “Footsie”) London stock exchange outpaced other international indices, rising over 7% for the 13-weeks ending June 29, 2018. An economic boom from the Royal Wedding, the possibility the U.K. stays within the European Union and the perception that the U.K. could be relatively insulated from tariff action likely helped drive the index.
U.S. Sectors
Top performing U.S. sectors for 13 weeks ending June 29, 2018, by total return included Energy (+14.2%), U.S. Real Estate (+9.3%) and Consumer Cyclical (+8.2%). Laggards for the 13 weeks include Financial Services (-1.3%), Consumer Defensives (-1.3%) and Industrials (-1.3%). Investors tried to decipher which market sectors would be impacted the most by tariff actions. Industrials and Consumer Defensive earnings could be hit by tariff actions as well as higher energy prices going forward.
Energy stocks rose significantly in the second quarter, driven by a sharp increase in oil prices and the positive impact of more efficient drilling and refining techniques by energy companies. The price of West Texas Intermediate Crude increased 18% in the second quarter while U.S. crude stockpiles shrank. The energy sector also offers income-oriented investors a dividend yield over 2.5% versus the S&P 500 dividend yield less than 2.0%.
The technology sector returned 6.3% as a whole for the 13-weeks ending June 29, 2018. Strong returns continued for the top technology stocks, with Netflix up 32.5%, Facebook up 21.6%, Amazon up 17.4%, Apple up 10.3% and Alphabet up 8.8%.