Markets, Economy

Weekly Kickstart (09/06/2016-09/09/2016)

9/6/16 8:00 AM

iStock_000000499785_Small-1Stocks rebounded last week, with the S&P 500 rising by 0.50 percent to 2,179.98. This small gain left the benchmark index up 6.66 percent 2016-to-date, and just 0.46 percent below the all-time closing high. As for the month of August, the benchmark index edged lower but Americans’ retirement savings still grew, according to new data from the Employee Benefit Research Institute (EBRI). Specifically, the average 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers rose by 1.4 percent last month, well below the 4.3 percent gain seen in July but a sign that participants continued to contribute to their plans in August. Moreover, older (55-64) and longer-tenured (20-29 years) workers saw their average 401(k) account balance rise by just 0.1 percent last month, not surprising given these larger accounts' lower overall sensitivity to plan contributions. Looking ahead, September has historically been the worst performing month for equities but any significant drawdowns could wind up creating attractive buying opportunities for persistent 401(k) participants.

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As for what drove the price action during the last five trading sessions, comments from Federal Reserve (Fed) Vice Chair Stanley Fischer appeared to weigh on equities earlier last week. Indeed, Fed Chair Janet Yellen in a speech at the annual economic symposium in Jackson Hole, Wyoming said that “the case for an increase in the federal funds rate has strengthened in recent months.” Vice Chair Fischer added to this hawkish statement the following week by saying in an interview that he believes the Fed could even raise interest rates twice this year. However, Vice Chair Fischer also said that employment data for August will “probably weigh in our decision” to raise interest rates, which likely explains why stocks rallied on Friday following the release of the somewhat worse than expected job report. For retirement investors with relatively long time horizons, though, the focus should be less on trying to predict near-term changes in U.S. monetary policy, and more on building wealth through long-term participation in an employer-sponsored 401(k). Such efforts can be enhanced with 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 what we learned about the U.S. economy last week, the positives included that the nation’s trade deficit narrowed, mortgage and refinance applications rose, pending home sales increased, Americans’ personal income and outlays growth firmed, consumer sentiment rebounded, corporate layoff announcements declined, and one of the Fed’s key inflation measures softened. As for the negatives, motor vehicle sales slowed, construction spending stalled, gauges of U.S. manufacturing activity continued to send mixed signals, nonfarm productivity contracted in the second quarter of 2016 by more than previously estimated, the rate of job creation in America cooled, small business hiring continued to wane, and consumers’ confidence in the labor market softened slightly. This holiday-shortened week the pace of economic data slows down considerably but there are still several important reports on services sector activity, employment, and consumers scheduled to be released.

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What To Watch:

Monday

  • US Holiday: Labor Day
  • Markets Closed

Tuesday

Wednesday

Thursday

Friday

 

  


 

Sources: Econoday, Bloomberg, Twitter, ZH, Advisor Perspectives, FRBG, FRBSL

Post author: Charles Couch

Disclosures