Markets, Economy

Weekly Kickstart (07/24/2017-07/28/2017)

7/24/17 8:00 AM

/iStock-167454627.jpgThe market melt-up continued last week, with the S&P 500 rising by 0.54 percent to 2,472.54. That gain left the benchmark index up 10.44 percent year-to-date, and just 0.05 percent below the all-time closing high. One thing that has helped fuel stocks higher recently is the corporate earnings season for the second quarter of 2017. Indeed, it is still early but of the 19 percent of the companies listed on the S&P 500 that have already reported their Q2 results, 73 percent have beat their average earnings per share (EPS) estimate, according to new FactSet data, and 77 percent have beat their mean sales estimate. Both of those figures are above the 5-year average, with much of the strength being found in the energy sector. Looking ahead the outlook is a bit more mixed as half of the firms have provided positive earnings guidance for Q3, while half have provided negative EPS guidance.

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That is not too surprising since recent economic reports have been somewhat disappointing, and uncertainty continues to build around what the Federal Reserve will do with monetary policy in the second half of 2017. Moreover, the next Federal Open Market Committee (FOMC) meeting will be held this week and although no major policy moves are expected, traders are likely going to pay close attention to the language used in the policy statement for clues about officials’ timetable for rate hikes and balance sheet reductions. At the same time, the CBOE’s VIX volatility index, often referred to as “investors’ fear gauge,” just posted its lowest weekly close on record. While some traders may consider that to be a contrarian indicator, historically a low VIX has not been a reliable sell signal. What all of this means for equities in the near-term remains unclear but for retirement investors, the focus should instead be on the long-term goal of amassing significant 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 cross-border inflation pressures moderated, mortgage and refinance applications rebounded, housing starts rose, construction authorizations lifted, and first-time claims for unemployment benefits fell to a 6-week low. As for the negatives, homebuilder sentiment softened, and regional manufacturing activity continued to ease following the post-election spike. This week the pace of economic data picks up with several important reports on manufacturing, housing, consumers, and wage growth scheduled to be released, along with the government’s first official estimate of U.S. gross domestic product (GDP) growth during the second quarter of 2017.

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

What To Watch:

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Sources: Econoday, FactSet, Twitter, Pension Partners, Wells Fargo, FRBSL

Post author: Charles Couch

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