Markets, Economy

Weekly Kickstart (05/31/2016-06/03/2016)

5/31/16 8:00 AM

iStock_000000499785_Small-1The market melt-up continued last week, with the S&P 500 gaining another 2.28 percent. This was the third largest week-over-week gain so far this year and it left the benchmark index up 2.70 percent 2016-to-date, and just 1.49 percent below the record high hit in May 2015. Volatility, as measured by the CBOE’s VIX volatility index, declined markedly last week and overall volumes drifted lower heading into the long Memorial Day weekend. Such trading activity is not uncommon around a holiday, and a relative dearth of domestic economic data only added to last week’s muted price action. Going forward, at least in the near-term, the markets will be focused on whether or not policymakers will decide to move forward with the next rate hike at the June Federal Open Market Committee (FOMC) meeting.

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Such a move could depend heavily on the May employment data from the Bureau of Labor Statistics (BLS) due out this Friday. April’s labor report was disappointing but the recent decline in initial jobless claims suggests that payroll growth might have rebounded this month, which officials could use to help justify raising rates. However, even if the Fed does not move in June, a July hike is still very much a possibility and as a result, traders will continue to pay close attention to each incoming data point on the U.S. economy. A rising rates environment definitely has the potential to be a headwind for equities but savvy retirement investors are likely not overly concerned because they understand that persistent and long-term participation in the market, combined with dollar-cost averaging, can help them not only benefit from rallies but also turn drawdowns into opportunities. As always, we are here to help with any questions you may have.

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To recap what we learned about the economy last week, the positives included that mortgage and refinance applications rose, new home sales surged, pending home sales jumped, the number of Americans making first-time claims for unemployment benefits declined, and U.S. gross domestic product (GDP) in the first quarter of 2016 grew by more than previously estimated. As for the negatives, the nation’s trade deficit widened, home values continued to rise faster than general inflation, several consumer sentiment measures softened, orders for U.S.-manufactured capital goods unexpectedly fell, gauges of national and regional manufacturing activity weakened, and the expansion in the larger services sector lost momentum. This week the pace of economic data picks up with lots of important reports on housing, manufacturing, consumers, and inflation scheduled to be released, along with the likely market-moving May job report from the BLS due out this Friday.

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What To Watch:

Monday

  • US Holiday: Memorial Day
  • Markets Closed

Tuesday

Wednesday

Thursday

Friday

 

  


 

Sources: Econoday, Bloomberg, Twitter, Advisor Perspectives, Wells Fargo, StockCharts

Post author: Charles Couch