Markets, Economy

Weekly Kickstart (03/12/2018-03/16/2018)

3/12/18 8:00 AM

/iStock-522646895.jpgThe market rebound resumed last week, as the S&P 500 jumped by 3.54 percent to 2,786.57. That solid gain left the benchmark index up 4.22 percent year-to-date, and just 3.00 percent below the all-time closing high. Volatility, though, remained elevated as investors scrambled to interpret the potential economic effects of President Trump’s newly imposed tariffs on steel and aluminum. The resiliency in the market last week suggests that investors, at least for now, are willing to overlook the President’s hardline stance on trade because the immediate fallout from the tariffs should be limited. For example, there are clear implications for employment, prices, and output in the industries that use a significant amount of steel and aluminum, but the effect on overall consumer inflation in the United States should be modest.

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Moreover, nearly two-thirds of the consumer price index (CPI) consists of services businesses, which typically have labor as the largest input cost rather than materials. However, going forward the key risk will be whether foreign countries retaliate by enacting their own restrictions on American goods and services. Such an occurrence could prompt a follow-up response by the United States and in turn ignite a full-on trade war. That would be a negative for both the market and the overall economy, so stocks may continue to be sensitive in the near-term to every trade-related headline out of Washington. Add to this the uncertainty still surrounding U.S. monetary policy and it seems likely that volatility will remain elevated for the foreseeable future. As a result, retirement investors should continue to focus on the long-term goal of amassing wealth. Assistance with that endeavor is available through the consistent use of tax-advantaged savings vehicles, 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, small business borrowing jumped, services sector activity firmed, productivity growth during the fourth quarter of 2017 was revised slightly higher, small businesses boosted staff sizes for the fifth month in a row, corporate layoff announcements fell, nonfarm payrolls growth surged, and gauges of both unemployment and underemployment in America remained near the best levels of the current business cycle. As for the negatives, the nation’s trade deficit widened sharply, factory orders declined, consumer credit growth slowed, initial jobless claims rose (albeit from a roughly 50-year low), average hourly earnings increased by less than expected, and more U.S. businesses cited concerns about rising input costs. This week the pace of economic data remains elevated, with several important reports on manufacturing, consumers, small business, employment, and inflation scheduled to be released.

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

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Sources: Econoday, Wells Fargo, FRBSL

Post author: Charles Couch

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