The week ending May 9 saw relatively limited aggregate movement on the markets. Domestic investments declined between 0.03% and 0.32%. However, there are distinct sector trends within the US markets. The Dow Jones Industrial Average made a new all-time high of 16,583.34 on Friday. Contrary to this, the NASDAQ continued the broad decline that began in early March, falling 1.24% this week, and has now declined 6.54% since early March.
We believe that various U.S. growth and technology stocks, such as those in the NASDAQ, are falling based on more cautious long-term growth assessments relative to their valuations. Simultaneously more value oriented stocks, such as those in the Dow, continue to climb as the overall economy strengthens backed by a favorable employment picture. At FutureAdvisor our long-term bias towards value stocks as implemented for our Premium customers helps position us well for this particular trend. Our research and the conclusions of Nobel prize winning economists suggests that value stocks have outperformed the market historically, and we believe they will continue to do so. We don’t know that value will outperform in any given month or year, but because retirement investing is typically a longer term investment approach, we expect value stocks to perform well over multiple years.
In the US we saw a favorable jobless claims report this week, continuing the theme of improving employment from last week. The trade deficit also narrowed slightly, and the non-manufacturing sector saw strong growth in April. In other releases, Q1 economic numbers continue to be weak, but more recent data shows strong momentum. As in previous weeks, the picture is one of weather-related softness in Q1, but we believe growth is now resuming.