Markets, Economy

Weekly Kickstart (07/11/2016-07/15/2016)

7/11/16 8:00 AM

iStock_000000499785_Small-1Stocks continued higher last week, with the S&P 500 rising by another 1.28 percent. This solid gain left the benchmark index up 4.21 percent 2016-to-date, and a fractional 0.04 percent below the all-time closing high hit in May of last year. In fact, a significant rally on Friday (+1.53 percent) following the release of the better-than-expected June job report pushed the S&P 500 at one point to within just 0.13 percent of its record intraday high. Further, 497 of the 500 stocks that make up the broad index ended Friday in positive territory, the 2nd-highest ratio of advancing-to-declining stocks on record, and the CBOE’s VIX volatility index, often referred to as investors’ “fear gauge,” plunged by nearly 50 percent over the past two weeks, the largest such decline ever. Despite this apparent bullishness, the yield on the 30-year U.S. Treasury bond fell to the lowest level in history last week, and the gap between yields on 2- and 10-year Treasury notes, a popular measure of the yield curve, declined to the flattest reading since 2007 on Friday. One possible way to interpret this is that many traders are not completely on board with the latest market melt-up. In some ways that is not too surprising since the S&P 500 has already surged by 6.94 percent off of the June 27th panic low despite there still being a lot of uncertainty surrounding the U.S. economy, Q2 corporate earnings, the upcoming Presidential election, the Federal Reserve’s timetable for interest rate normalization, and the ultimate fallout from Britain’s European Union referendum. Some traders may fear that all of this could mean that stocks going forward will be more sensitive to negative headlines and ripe for a pullback. Experienced retirement investors, though, are likely less concerned because they have confidence in the stock market’s long-term resiliency and understand that persistent participation in an employer-sponsored savings plan, 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 U.S. economy last week, the positives included that services sector activity rebounded, consumers’ credit utilization expanded, the number of Americans making first-time claims for unemployment benefits fell to a near-record low, labor market confidence firmed, the underemployment rate fell to the best level of the recovery, nonfarm payrolls growth surged, and small businesses continued to drive private-sector job creation in this country. As for the negatives, mortgage and refinance applications declined, the nation’s trade deficit widened, factory orders slid, consumer spending cooled, announced job cuts rose, monthly wage growth slowed, and the rate of joblessness in America edged higher (although largely due to an uptick in labor force reentrants). This week the pace of economic data remains elevated, with important reports on manufacturing, business activity, employment, consumers, and inflation scheduled to be released. There will also be a handful of potentially market-moving speeches by Fed officials occurring throughout the week, as well as the latest reading on small business owner optimism from the National Federation of Independent Business (NFIB) due out tomorrow morning.

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What To Watch:

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Tuesday

Wednesday

Thursday

Friday

 

  


 

Sources: Econoday, Bloomberg, Twitter, Financial Times, Advisor Perspectives, Pension Partners, FRBSL

Post author: Charles Couch

Disclosures