Benchmark Review & Monthly Recap, September 2018

Interest Rates March Higher Amid Ongoing Growth


  • The rally in large-cap U.S. equities continued in September and the Dow Jones Industrial Average put in a new high during the month as well.
  • It was a steady march higher for 10-year U.S. Treasury yields in September, which put pressure on returns for most fixed income sectors.
  • As expected, the Federal Reserve raised rates in September for the third time in 2018.
  • In the late hours of September 30, Canada and the U.S. were able to agree on a deal that, along with Mexico, will replace NAFTA.

Download Benchmark Data


The S&P 500 and Dow Jones Industrial Average indices each posted new all-time highs in September as large-cap stocks stood out during the month with the S&P 500 advancing 0.57%, and the Dow Jones Industrial Average rising by 1.97%. Although small-cap stocks continued to show strength on a year-to-date basis, the Russell 2000 Index struggled in September and turned in negative results (-2.41%). Large-cap stocks showed the best returns in September, but all major U.S. equity indices turned in positive gains for the third quarter of 2018. The Russell 3000 Index posted modestly higher returns during the month, increasing by 0.17%.

Style played less of a role on results in September. Large-cap growth stocks, as measured by the Russell 1000 Growth Index, advanced 0.56% in September, while large-cap value stocks, as measured by the Russell 1000 Value Index, inched higher by 0.20%. Mid and small cap stocks from both a growth and value perspective declined in September, which seemed to be a month where market capitalization mattered more than style. However, through three quarters of 2018, growth has still been the clear leader from a style perspective.

In general, developed international equities advanced in September, while emerging markets continued to struggle and declined further during the month. Overall, developed international equities improved as the MSCI ACWI ex USA Index, a broad measure of international equities, gained 0.46% and the MSCI Emerging Markets Index declined -0.76%. International equities are still broadly lower through three quarters of 2018, with emerging markets showing some of the largest declines in the global equity markets year to date.

Trade and tariff concerns continued to be front and center throughout the month, but developments seemed to be better than they could have been, and markets largely shrugged off those concerns. In the late hours of September 30th, Canada and the U.S. were able to agree on a deal that, along with Mexico, will replace NAFTA. The late-month trade agreement, which has initially been termed the United States-Mexico-Canada Agreement (USMCA), sent equity markets rallying on the first trading day of October. The U.S. dollar finally moved off its high from mid-August. Although the dollar drifted lower for much of September, a late-month bounce erased most of that weakness.


The yield on the 10-year U.S. Treasury rose 19 basis points during the month from about 2.86% to around 3.05%. As would be expected during a month when rates rose, most fixed income sectors declined in September. The one notable exception continued to be high-yield bonds, which enjoyed gains for the month and added to already positive year-to-date returns. The Bloomberg Barclays U.S. Aggregate Bond Index and the Bloomberg Barclays U.S. Credit Index fell -0.64% and -0.34%, respectively. These two indices remained in negative territory through the first three quarters of 2018. Interest-rate sensitive U.S. Treasuries dropped in September with longer-dated U.S. Treasuries having some of the largest monthly and year-to-date declines in fixed income. Muni bonds and TIPS also dropped in September.

The Bloomberg Barclays U.S. Aggregate Corporate High Yield Index advanced 0.56% in September, 2.4% for the third quarter, and 2.57% on a year-to-date basis. High yield bonds have been the best performing fixed income asset class in 2018 as investors continue to be rewarded for taking on credit exposure during this ongoing economic expansion.


Economic data released in September remained solid and the U.S. economy continues to look poised for ongoing growth. The latest reading for the ISM manufacturing index in August recorded a strong increase to 61.3, well above expectations of 57.6 and the prior month’s mark of 58.1. The ISM non-manufacturing index, which represents the much larger service industries in the U.S. economy, also exceeded expectations, rising to 58.5. ISM readings above 50 indicate economic expansion.

Employment gains also surpassed expectations in August with 201,000 non-farm payroll additions compared to expectations of 190,000, but the unemployment rate stayed at 3.9%, when it was expected to drop to 3.8%. Revisions to payroll additions for the prior two months were moved lower showing 50,000 fewer jobs added than previously reported.

Average hourly earnings increased by 2.9% on a year-over-year basis in August, when a more modest increase of 2.7% was expected. The Conference Board’s leading economic indicators index (the Leading Index) continued to show progress as it rose 0.4% for the month. Finally, the third reading of Q2 2018 GDP growth remained at the previously reported 4.2% annualized growth rate as expected.

The Federal Open Market Committee met in September and increased policy rates as expected by 0.25%, marking the eighth rate increase since this tightening cycle began in December 2015. The Fed will continue to monitor developments in the economy to determine whether one more rate increase will take place in 2018. Overall, this continues to be a slow-paced and measured rate-hike cycle.

Event Period Estimate Actual Prior Revised
ISM Manufacturing Aug 57.6 61.3 58.1
ISM Non-Manf. Composite Aug 56.8 58.5 55.7
Change in Nonfarm Payrolls Aug 190k 201k 157k 147k
Unemployment Rate Aug 3.80% 3.90% 3.90%
Average Hourly Earnings YoY Aug 2.70% 2.90% 2.70%
JOLTS Job Openings July 6675k 6939k 6662k 6822k
PPI Final Demand MoM Aug 0.20% -0.10% 0.00%
PPI Final Demand YoY Aug 3.20% 2.80% 3.30%
PPI Ex Food and Energy MoM Aug 0.20% -0.10% 0.10%
PPI Ex Food and Energy YoY Aug 2.70% 2.30% 2.70%
CPI MoM Aug 0.30% 0.20% 0.20%
CPI Ex Food and Energy MoM Aug 0.20% 0.10% 0.20%
CPI YoY Aug 2.80% 2.70% 2.90%
CPI Ex Food and Energy YoY Aug 2.40% 2.20% 2.40%
Retail Sales Ex Auto and Gas Aug 0.50% 0.20% 0.60% 0.90%
Industrial Production MoM Aug 0.30% 0.40% 0.10% 0.40%
Building Permits Aug 1310k 1229k 1311k 1303k
Housing Starts Aug 1240k 1282k 1168k 1174k
New Home Sales Aug 630k 629k 627k 608k
Existing Home Sales Aug 5.37m 5.34m 5.34m
Leading Index Aug 0.50% 0.40% 0.60% 0.70%
Durable Goods Orders Aug P 2.00% 4.50% -1.70% __
GDP Annualized QoQ 2Q T 4.20% 4.20% 4.20%
U. of Mich. Sentiment Sept F 100.6 100.1 100.8
Personal Income Aug 0.40% 0.30% 0.30%
Personal Spending Aug 0.30% 0.30% 0.40%
S&P CoreLogic CS 20-City YoY NSA July 6.20% 5.92% 6.31% 6.36%
P = Preliminary, T = Third, F = Final
Source: Bloomberg

Download Market Recap

Past performance is not indicative of future results. This is not financial advice or an offer to sell any product. Clark Capital Management Group, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. It should not be assumed that any of the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. Clark Capital Management Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Clark Capital’s advisory services can be found in its Form ADV which is available upon request. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Nothing herein should be construed as a solicitation to buy, sell or hold any securities, other investments or to adopt any particular investment strategy or strategies. For educational use only.