Nuveen TIAA

U.S. equity investors lose their appetite for risk

Brian Nick, Chief Investment Strategist, TIAA Investments


April 13, 2017

Click here for the downloadable version (PDF)

Quote of the week

"Our worrying is very broadminded.”– Linus, from the cartoon Peanuts

The Lead Story: Tough sledding for U.S. equities

April can be glorious. The days grow longer, flowers bloom, and baseball returns. It’s also been a profitable month for U.S. equity investors over the past 20 years, with the S&P 500 Index gaining an average of 2.1%.

During the past week, though, markets began to fret over a wide range of potentially worrisome events. While none individually hurt stock prices, collectively they contributed to a risk-averse mood on Wall Street. Among the concerns:

Brian Nick, Chief Investment Strategist, TIAA Investments

Brian Nick - 140px

Article Highlights

  • Escalating tensions in Syria and North Korea
  • Deteriorating relations with Russia
  • The possibility that a far right or far left candidate, either Marine Le Pen or Jean-Luc Melenchon, will become France’s next president, as the first round of voting begins on April 23

Also on investors’ minds are mixed first-quarter earnings results from several global banks and President Donald Trump’s jawboning the U.S. dollar lower after asserting that the currency “is getting too strong.” Against this volatile backdrop, the VIX, or “fear factor” gauge of stock-market volatility, reached its highest level since early November.

In equity markets, the S&P 500 Index lost 1.1% in a week shortened by the Good Friday holiday. Overseas, Europe’s broad STOXX 600 Index managed a small gain (+0.17%) in U.S. dollars.

In other news: Treasuries benefit as unease intensifies

Increased demand for safe-haven assets supported U.S. Treasuries. After starting the week at 2.38%, the yield on the bellwether 10-year note dropped to 2.23%, a five-month low, on April 13. (Bond yields and prices move in opposite directions.) Gold, another popular investment during times of market stress, also rose. Returns for non-Treasury fixed-income “spread sectors” were broadly, albeit modestly, positive for the week through April 12.

Current updates to the week’s market results are available here.

Below the fold: Consumers still don’t appear to be worried

In a light week for U.S. data releases, consumer optimism reached a multi-year high, and the U.S. job market continued to tighten. Among the past week’s reports:

  • Consumer sentiment rose to its highest level since 2000, according to April’s preliminary reading of the University of Michigan Index. Consumers cited favorable views of current economic conditions and of their personal finances.
  • Following their largest drop in nearly two years, weekly jobless claims dipped by an additional 1,000, to 234,000. The four-week moving average, considered a better measure of labor market trends because it irons out week-to-week volatility, also fell, by 3,000, to 247,250.
  • U.S. job openings jumped to a seven-month high in February, according to the JOLTS report, while the pace of hiring slipped.
  • Small-business sentiment ticked down in March for the second straight month but stayed near a historically high level, according to the NFIB Small Business Optimism Index. However, the Uncertainty Index, a subset of data that tracks how small-business owners view near-term prospects, rose sharply—a possible warning sign.

U.S. retail sales and the Consumer Price Index for March will be released on April 14.

The Back Page: Procrastinators, fear this

Not everything in April is worth waiting for, as it also brings one of the most dreaded days of the year—income tax filing day.

President Trump would like to make filing a bit less onerous. Although details of his plan remain sketchy, he has promised to simplify the U.S. tax code by, among other things, reducing the number of personal income tax brackets from seven to three. This would be the fewest since 1991, when there were also three. (The highest number of brackets? A whopping 56, in 1918.) Coincidentally, when the personal income tax was introduced in 1913, there were seven brackets, just as there are today, with tax rates ranging from 1% to 7%.

According to, in 2015, about 15% of all taxpayers (more than 21 million) waited until the last week to file. Miss this year’s April 18 deadline? Now that’s something to worry about.