Markets, Economy

Weekly Kickstart (01/16/2018-01/19/2018)

1/16/18 8:00 AM

/iStock-841214812.jpgThe market melt-up continued last week, as the S&P 500 rose by 1.57 percent to 2,786.24, another new all-time closing high. The latest push higher in equities was kicked off by last month’s long-awaited passage of the GOP’s tax reform bill. The hope is that the tax cuts will translate into higher wages for Americans down the road, but more immediate effects are already being seen. For example, AT&T said that because of the passage of the tax package the company will “pay a special $1,000 bonus to more than 200,000 of its U.S. employees.” Several companies, such as Fifth Third Bank, Comerica, SunTrust, and Wells Fargo, have also stated that they will raise their minimum wages to $15 an hour because of tax reform, while other firms said that they plan to focus more on workers’ long-term well-being.

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Aflac in a press release, for instance, said that “as a result of the recent tax reforms enacted by Congress and signed into law by the President,” the company will increase its 401(k) match (from 50% to 100% on the first 4% of employee contribution), along with a one-time contribution of $500 to every employee's 401(k) plan. Similar initiatives were announced by Visa, Nationwide, and a few other companies this month, which is encouraging since employer-provided matching contributions are one of the most powerful savings tools available. Consider this illustration by Financial Engines: “[Assume] a 25-year-old employee with no initial savings, who consistently saved six percent of her income and received an employer match of three percent. At retirement this employee would have saved a total of $483,776, assuming five percent real growth and 1.5 percent real salary increases. In this scenario, the employer match would provide $161,259 or 33 percent of the total saved.”

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To recap a few of the things we learned about the economy last week, the positives included that mortgage and refinance applications rose, small business borrowing activity improved (helped by rising loan approval rates), retail sales growth firmed, consumer credit jumped, wholesale and trade-related inflation pressures moderated, and the ratio of quits to layoffs and discharges remained elevated (a sign of Americans’ confidence in the labor market). As for the negatives, small business owner optimism cooled, the total number of job openings in America fell, household inflation pressures increased, and first-time claims for unemployment benefits unexpectedly spiked to the highest reading since September. This holiday-shortened week the pace of economic data slows down but there are still a handful of important reports on housing, manufacturing, and consumers scheduled to be released.

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**A more detailed snapshot of the U.S. economy can be found here.**

What To Watch:

Monday

  • US Holiday: Martin Luther King Jr. Day

Tuesday

Wednesday

Thursday

Friday

  


 

Sources: Econoday, NAPA, EBN, Aflac, Financial Engines, FRBSL

Post author: Charles Couch

Disclosures