Markets, Economy

Weekly Kickstart (04/04/2016-04/08/2016)

4/4/16 8:00 AM

iStock_000000499785_Small-1Stocks headed higher last week, with the S&P 500 gaining 1.81 percent. This solid increase left the benchmark index up 1.41 percent 2016-to-date and just 2.73 percent below the record high hit in May of last year. March came to an end on Thursday of last week and the S&P 500 finished the month up 6.60 percent, the best monthly gain since October. The Employee Benefit Research Institute (EBRI) estimated that the average 401(k) balance for workers aged 55-64 and 20-29 rose by 4.5 percent and 6.9 percent, respectively, last month. Large drawdowns in January and February weighed on quarterly performance but the benchmark index still ended Q1 with a 0.77 percent gain. Stocks started April with a strong rally thanks in part to another solid report on the U.S. labor market. Going forward, though, there are still a lot of potential headwinds for equities in Q2. For example, uncertainty surrounding China, global monetary policy, a British exit (Brexit) from the European Union, the price of oil, and the Presidential election could all weigh on risk assets in the near-future. For retirement investors, though, persistent and long-term participation in the market is what matters. This can be enhanced by dollar-cost averaging which aims to turn pullbacks into opportunities. As always, we are here to help with any questions you may have.


The recent deluge of commentary from officials at the Federal Reserve (Fed) continued last week, with the highlight being a rather dovish speech given by Janet Yellen on Tuesday. Specifically, Chair Yellen touched on the potential risks to the U.S. economy that could result from global economic and financial uncertainty, and stressed that she believes it is “appropriate for the Federal Open Market Committee (FOMC) to proceed cautiously in adjusting [monetary] policy.” Similarly, Chicago Fed President Charles Evans the following day argued that there is justification for a slower pace of interest rate increases and he even said that he would be “surprised” if the committee decided to hike at the next policy meeting later this month. Unsurprisingly, equities and U.S. Treasury securities both responded favorably in a kneejerk fashion to the dovish Fed comments, and the greenback weakened markedly relative to other major currencies. Volatility was elevated later in the week due to quarter-end portfolio rebalancing and an uptick in domestic data releases.


To recap what we learned about the U.S. economy last week, the positives included that pending homes sales increased, national and regional manufacturing activity rebounded, small business hiring picked up, the number of announced job cuts contracted, consumer spending improved, labor force participation rose, and monthly wage growth accelerated, albeit slightly. As for the negatives, construction spending fell, mortgage and refinance applications declined, the rise in home values continued to outpace average wage growth, first-time claims for unemployment benefits jumped to a 2-month high, the jobless rate ticked higher, and measures of consumer sentiment softened. This week the pace of economic data slows down but there are still several important reports on manufacturing, international trade, the services sector, and employment scheduled to be released, along with the potentially market-moving minutes from last month’s FOMC meeting due out this Wednesday.


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Sources: Econoday, Bloomberg, WSJ, CNBC, FRBG, Twitter, EBRI, NAPA, ZH, Pension Partners, Advisor Perspectives (DShort)

Post author: Charles Couch