Denali Wealth Management

2018 Q3 Market Commentary

General Market Commentary as of September 30, 2018

Global economic growth continues at a steady pace. US GDP came in at a 4.2% annualized rate for the 2nd quarter (reported in the 3rd quarter). The economy is in its 9th year of economic expansion, the 3rd longest on record. The Federal Reserve, in September, raised the federal funds rate target by 25 basis points in light of this growth. Market expectations are for one additional increase in 2018 making it four for the year.

Global equities continued their recovery in the 3rd quarter while US equities advanced to record territory. After underperforming last quarter, large-cap stocks outperformed their small-cap counterparts for the 3rd quarter. Growth continued to outperform value across the capitalization spectrum for the 3rd quarter of 2018 on the heels of outperforming across all capitalization sizes by historical margins in 2017.

US interest rates continue to slowly rise while remaining at historical lows. Interest rates rose for short term US Treasury securities in the 3rd quarter in concert with the Fed’s interest rate hikes in June and September. The yield on the 10-year treasury also rose, but by a smaller amount than short-term yields, which reinforced the markets concerns over a flatten yield curve.

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 7.20% 15.66% 14.92% 11.62% 2,913.98
Dow Jones Industrial Average 9.01% 18.09% 17.56% 11.83% 26,458.31
NASDAQ Composite 7.14% 23.87% 20.31% 16.36% 8,046.35

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2018 Q2 Market Commentary

General Market Commentary as of June 30, 2018

The volatility introduced into the stock market earlier this year by trade tiffs and tantrums has naggingly persisted into summer. All this has played out against the background of a surging U.S. economy. While domestic growth estimates for the second quarter have risen to an annualized rate of 5 percent, double the pace set in the last quarter, the European, Chinese and Japanese economies are decelerating.

Then there’s the headwind of rising interest rates envisioned by the Fed. Add to that the potential inflationary impact of an all-out trade war, and it’s no wonder the markets are rocky.

September Considerations

By the time Labor Day hits in early September, we will have critical clarity regarding the following:

1. Whether there is a full-blown U.S./China trade war or not?

2. How many Fed rate hikes this year (Three or Four)?

3. Does North Korea continue to cooperate with the U.S.?

4. Will the “Goldilocks” economic dynamic of strong growth and tame inflation reappear?

5. Can the rise in the 10-year yield and U.S. Dollar remain “orderly” or does it cause a pullback in stocks?

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 2.88% 12.17% 9.63% 11.10% 2,718.37
Dow Jones Industrial Average 0.70% 13.69% 10.24% 10.58% 24,271.41
NASDAQ Composite 6.31% 22.31% 14.62% 17.15% 7,510.30

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2018 Q1 Market Commentary

General Market Commentary as of March 31, 2018

Global equity markets declined in Q1 with investors unnerved first by concerns about the path of US interest rates and then worries over trade. Global bond markets reflected higher inflation, with most major government bond yields climbing.

Equities

US equities began the year strongly, boosted by tax reforms, but ended the quarter lower amid concerns over inflation and the impact of US-China trade sanctions. Indeed, macroeconomic indicators remained broadly positive throughout Q1. US business confidence reached an unexpected, multi-decade high in March. GDP for Q4 2017 was revised upwards to show growth of 2.9%, and while industrial activity slowed, as measured by the ISM manufacturing index, it continued to indicate expansion.

Treasury

US Treasury yields rose markedly across the curve over the quarter. Corporate bonds made negative total returns and underperformed government bonds.

Market Recap

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 -1.17% 11.83% 8.51% 10.98% 2,640.87
Dow Jones Industrial Average -2.49% 16.65% 10.68% 10.58% 24,103.11
NASDAQ Composite 2.33% 19.50% 12.96% 16.67% 7,063.45

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2017 Q4 Market Commentary

General Market Commentary as of December 31, 2017

U.S. Stocks continued their climb in the fourth quarter as the tax bill became reality and as generally upbeat economic data gave the green light to the Fed to raise rates again causing a pull back in bonds.

Outlook

The outlook for stocks remains positive although muted versus last year. Almost all the impact of the fiscal package is hitting the demand side of the economy, which will be a temporary jolt to growth. Concerns over midterm elections, a slow down in Chinese growth and the ever-present political risk posed by the Middle East and North Korea could cause problems we don’t foresee at this time.

Current Shift

The global economy is experiencing a relatively steady, synchronized expansion amid low inflation, with low risk of recession. The current shift toward tighter global monetary policy may boost market volatility, which underscores the importance of diversification.

Bonds on the other hand look to be flat to negative for the year, unless a “Black Swan” appears and causes a flight to safety.

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 6.12% 19.42% 9.10% 13.39% 2,673.61
Dow Jones Industrial Average 10.33% 25.08% 11.52% 13.53% 24,719.22
NASDAQ Composite 6.27% 28.24% 13.38% 17.98% 6,903.39

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2017 Q3 Market Commentary

General Market Commentary as of September 30, 2017

It’s been a good quarter for global equity markets, with the economic data continuing to point to a healthy global economy. In the US, job vacancies hit the highest level since 2000. In Japan, there are now more jobs available per applicant than at any point since 1974. In the UK, the unemployment rate is the lowest since 1975 and Eurozone consumer confidence is at its highest since 2001.

Quantitative Tightening

Against this positive economic backdrop, central bankers have continued to indicate that they want to gradually reduce the level of monetary policy stimulus in place. The US Federal Reserve (the Fed) announced that it will start the process of “quantitative tightening”. This reduction in the size of its balance sheet will begin to reverse some of the quantitative easing (QE) that has been so supportive of bond prices in recent years. The Fed also continues to suggest that another rate rise is in the cards for December. Meanwhile, the European Central Bank (ECB) looks set to announce a further slowdown in the pace of its own QE program and, not to be left out, even the Bank of England (BoE) has strongly suggested that it will raise interest rates before the year is out.

We seem to be set up nicely for a solid finish to 2017. The Fed’s plan for interest rates could be the biggest potential disruption for the markets in the fourth quarter barring some unforeseeable disruption.

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 3.96% 16.19% 8.50% 11.83% 2,519.36
Dow Jones Industrial Average 4.94% 22.38% 9.55% 10.77% 22,405.09
NASDAQ Composite 5.79% 22.29% 13.07% 15.83% 6,495.96

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

Denali Wealth Management

2017 Q2 Market Commentary

General Market Commentary as of June 30, 2017

Stocks continued to climb during the second quarter, as a Fed rate hike, valuation concerns, and a fluid political landscape in the U.S. didn’t dent the market. Investors remain overly cautious expecting something disastrous at any moment. The longer investors nervousness continues, the longer this bull market will run.

Bull Market

Economic data fully supports the bull market. The political and social headlines are successfully distracting investors from what really matters, corporate earnings. First quarter earnings were the best since 2011 and the second quarter estimates are looking strong. Stock returns were strong around the globe in the second quarter as emerging markets and international developed stocks outperformed U.S. stocks.

The 10-year U.S. Treasury note finished the quarter with a 2.29% yield after reaching a low for the year of 2.12% in June. The yield curve continues to flatten as the short end reacts to the Fed rate hikes and the long end celebrates low inflation. Don’t expect too much out of bonds in the third quarter.

Tot Return 3-MO* 12-MO* 3-Year* 5-Year* Closing Value
S&P 500 2.57% 15.46% 7.33% 12.21% 2,423.41
Dow Jones Industrial Average 3.32% 19.07% 8.26% 10.64% 21,349.63
NASDAQ Composite 3.87% 26.80% 11.68% 15.91% 6,140.42

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.