Markets, Economy

Weekly Kickstart (02/25/2019-03/01/2019)

2/25/19 8:00 AM

iStock-626627280.jpgStocks continued higher last week, as the S&P 500 rose by 0.62 percent to 2,792.67. That left the benchmark index up 11.40 percent 2019-to-date, and just 4.71 percent below the all-time closing high hit last September. Since most major indices have yet to experience even a single weekly decline this year, some pullback or at least consolidation should be expected following the V-shaped bounce off of December’s panic lows. Moreover, as stocks hover near the high-end of the Q4 2018 range, market participants will pay an increasing amount of attention to incoming news headlines, and one such issue that traders were focused on last week was the release of the minutes from the latest Federal Open Market Committee (FOMC) meeting. Indeed, Fed officials made a dramatic shift in monetary policy at the January meeting, and the minutes provided some clarity on the reasoning behind the committee’s sudden dovish leaning.


More importantly, in December the Fed projected that three additional quarter-point interest rate hikes would occur by the end of 2020. Following January’s Fed statement, though, the market is instead anticipating a 25-basis point cut over that same time period. The significant gap between the committee’s earlier forecasts and current market expectations means that if the FOMC does not significantly alter its interest rate projections in the next quarterly update (March 21st) then traders will likely be very displeased. That is especially true since the “newly dovish Fed” has been one of the main catalysts for the post-Christmas rebound in equities. Add to this the uncertainty still surrounding U.S.-China trade negotiations, corporate earnings growth, and the approaching debt ceiling deadline and it would not be surprising if volatility picks up in the near-term. Any regular investors uncertain how to navigate this environment should consider consulting with a professional financial advisor and as always, we are here to help with any questions you may have.


To recap a few of the things we learned about the economy last week, the positives included that the 30-year mortgage rate slid to a 12-month low, home purchase applications rose, homebuilder confidence improved, and the number of Americans making first-time claims for unemployment benefits decreased. As for the negatives, existing home sales fell, regional manufacturing activity deteriorated, and core capital expenditures, an important proxy of U.S. business investment, unexpectedly declined. This week the pace of economic data picks up slightly with a few important reports on housing, manufacturing, consumers, and inflation scheduled to be released, along with the government’s first official estimate of U.S. gross domestic product (GDP) growth during the fourth quarter of 2018 due out on Thursday.


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

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Sources: Econoday, Twitter, Pension Partners, FRBG, FRBSL

Post author: Charles Couch