Markets, Economy

Weekly Kickstart (06/13/2016-06/17/2016)

6/13/16 8:00 AM

iStock_000000499785_Small-1Stocks edged lower last week, with the S&P 500 losing 0.15 percent. This small decline left the benchmark index up 2.55 percent 2016-to-date, and just 1.63 percent below the all-time high hit in May of last year. Looking past the relatively flat week-over-week performance, the intraday price action was somewhat choppy during the last five trading sessions as the S&P 500 oscillated between being up 1.02 percent and down 0.44 percent for the week. Stocks started the week on a positive note and major indices neared record highs as Federal Reserve Chair Janet Yellen in a speech voiced concern about May’s dismal job report. Moreover, U.S. Treasury yields fell sharply last week as traders believe that uncertainty surrounding the domestic economy will cause Fed officials to move slower with interest rate normalization. In fact, the market-implied probability last Friday of a rate hike occurring at this week’s Federal Open Market Committee (FOMC) meeting was virtually zero, and one would have to look all the way out until December to find a greater than 50 percent chance of an increase to the discount rate priced in.


Some analysts believe that a rate hike is still very much on the table for the July FOMC meeting but others disagree due to overseas risks. For example, stocks experienced their largest decline in three weeks last Friday thanks in part to fresh poll results that favored an exit in Britain’s European Union referendum. Uncertainty about China’s economy, the U.S. political landscape, and the price of oil could also provide more excuses for Fed officials to delay an interest rate hike in the near-future. Regardless of what the FOMC decides to do with monetary policy over the next few months, 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.


To recap what we learned about the economy last week, the positives included that mortgage and refinance applications rose, first-time claims for unemployment benefits fell for the fourth week in a row, the number of job openings in America climbed to a record high, and the ratio of unemployed workers to job vacancies fell to the best level since 2001. As for the negatives, Americans’ borrowing activity cooled, consumer sentiment deteriorated slightly, the average merchant wholesaler’s stock-to-sales ratio remained elevated, nonfarm productivity declined, unit labor costs jumped, and the hiring rate fell to a nearly 2-year low. This week the pace of economic data picks up with lots of important reports on retail sales, inflation, manufacturing, housing, and small business scheduled to be released, along with the potentially market-moving announcement on U.S. monetary policy from the FOMC this Wednesday.


What To Watch:


  • Nothing significant








Sources: Econoday, Bloomberg, Twitter, Advisor Perspectives, Financial Times, WSJ, StockCharts, FRBSL

Post author: Charles Couch