Markets, Economy

Weekly Kickstart (01/17/2017-01/20/2017)

1/17/17 8:00 AM

/iStock-487831223.jpgStocks edged lower last week, with the S&P 500 falling by 0.10 percent to 2,274.64. This small loss still left the benchmark index up 1.60 percent 2017-to-date, and just 0.10 percent below the all-time closing high. During the last five trading sessions, major indices held within a relatively narrow range, and the CBOE’s VIX volatility index, often referred to as investors’ “fear gauge,” slid to a nearly 3-year low. The VIX at such a level, though, is perhaps misleading because many market participants have actually grown concerned about where equities are headed in the near-term due to the uncertainty that continues to surround President-elect Donald Trump’s “first 100 days” in office. Indeed, stocks have surged since the election because of an improving economic backdrop, and the anticipation of significant tax reform, reduced regulatory burdens for U.S. businesses, and additional spending on infrastructure and defense from the incoming administration.

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However, these positive stimulus measures will likely not occur immediately, and their ultimate composition could differ greatly from the rhetoric expressed on the campaign trail. There is also the potential for tighter immigration and other forms of increased protectionism under the new administration that may constrain economic growth in the long run, and perhaps even put more upward pressure on inflation. The incoming administration’s agenda during the “first 100 days” will therefore be critical to gauging its priorities and preferences on regulation, trade, and fiscal stimulus for the rest of 2017. With such uncertainty, many traders have understandably become worried that the post-election spikes in consumer, business, and overall market sentiment have been a bit overdone, especially with the various other headwinds that stocks still have to deal with, e.g. oil volatility and corporate earnings. For retirement investors, though, the focus should be less on the near-term trajectory of equities, and more on the long-term goal of accumulating wealth. Assistance with this endeavor can be found through consistent participation in a tax-advantaged 401(k) plan, dollar-cost averaging, and regularly consulting with a professional financial advisor. As always, we are here to help with any questions you may have.

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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, consumers’ willingness to utilize credit jumped, total job openings lifted, the number of Americans making first-time claims for unemployment benefits remained near a multi-decade low, and small business owner sentiment improved markedly, along with their reported plans to boost worker compensation. As for the negatives, cross-border inflation pressures continued to rise, prices in the production pipeline rose faster than expected, wholesale sales disappointed forecasts, core retail sales growth moderated, consumer confidence eased, and continuing jobless claims remained elevated compared to pre-election levels. This holiday-shortened week the pace of economic data slows down but there are still several important reports on manufacturing, housing, employment, and inflation scheduled to be released, along with a handful of speeches from voting members of the Federal Open Market Committee (FOMC).

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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
  • All Markets Closed

Tuesday

Wednesday

Thursday

Friday

  


 

Sources: Econoday, Twitter, Bloomberg, Advisor Perspectives, Goldman Sachs, Wells Fargo, FRBSL

Post author: Charles Couch

Disclosures