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A Roller Coaster First Half for Equities

The stock market is occasionally likened to a roller coaster, and that analogy was apt in the first half of 2018. After lots of ups and downs, worldwide stocks finished virtually where they began (see chart).

U.S. stocks fared slightly better, with the S&P 500 index gaining 2.6%. However, sector returns were bifurcated, with aggressive growth stocks outperforming more defensive areas. The NYSE FANGs+ index, which is made up of high-priced technology stocks and sports a Price/Earnings (P/E) ratio of 55, finished up nearly 30%. On the flipside, the defensive dividend-paying utilities and telecom sectors were down 8-9%.

Overseas stocks declined as a more aggressive Federal Reserve caused the dollar to rebound in the first half. Trade fears also weighed. Developed markets finished the first half down 2.4%, while emerging markets fell 6.6%. Overseas equity valuations remain attractive, in our view.

Bond markets also came under pressure as interest rates rose. The Barclays U.S. Aggregate Bond index lost 1.6% through June. Under-performance by bonds and dividend-paying stocks has made 2018 a challenging year for investors hoping to play it safe. Nevertheless, investors should maintain adequate amounts of defense in portfolios as the economic expansion enters into its 10th year.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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Hefren-Tillotson Inc. is a leading diversified financial services firm providing investment and retirement plan management and comprehensive, financial planning through MASTERPLAN® for individuals and businesses. The firm’s wealth management services are administered by Certified Financial Planner (CFP) professionals, Chartered Financial Analyst (CFA) Charter holders, attorneys, Chartered Life Underwriters, and CPA/PFS’s. Hefren-Tillotson offers corporate services including 401(k) retirement planning, executive financial counseling, fiduciary reviews and workplace financial planning seminars. Founded in 1948, the firm is headquartered in Pittsburgh and has offices located in Pittsburgh, Butler, Greensburg, North Hills, and South Hills. MEMBER SIPC.