Markets, Economy

Weekly Kickstart (10/01/2018-10/05/2018)

10/1/18 8:00 AM

iStock-626627280.jpgStocks were under pressure last week, as the S&P 500 fell by 0.54 percent to 2,913.98. That small loss still left the benchmark index up 8.99 percent year-to-date, and just 0.57 percent below the record close. There were numerous headlines for markets to react to during the past few trading sessions but a key issue that investors were paying close attention to was the latest announcement on monetary policy from the Federal Open Market Committee. Indeed, officials on Wednesday raised the target range for the federal funds rate to 2.00-2.25 percent, the 8th hike since the central bank started gradually tightening in 2015. The committee in September also updated its quarterly economic projections, with highlights being an upgraded forecast for 2018 real gross domestic product (GDP) growth, as well as a slightly lower expectation for the unemployment rate. As for inflation, estimates were revised downward for 2019, albeit fractionally, as officials continue to believe that the impact from the recent rise in oil prices will prove to be transitory.

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Fed Chair Jerome Powell during the post-announcement press conference summarized the committee’s policy stance by saying that “rates remain low, and my colleagues and I believe that this gradual return to normal is helping to sustain this strong economy for the longer-run benefit of all Americans.” Looking ahead, the committee’s revised “dot plot” still implies one more quarter-point rate increase this year, three in 2019, and one in 2020. Altogether there were few surprises in the latest monetary policy announcement, and the market’s attention should therefore shift back to the continued uncertainty surrounding U.S. trade policy, the mid-term elections, and the corporate earnings season for the third quarter of 2018. With so many potential volatility catalysts remaining, regular investors as usual should try to avoid reading too heavily into the day-to-day fluctuations in stock prices and instead stay focused on the long-term goal of amassing a large retirement nest egg. Assistance is available through the consistent use of tax-advantaged savings vehicles, 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 a few of the things we learned about the economy last week, the positives included that mortgage applications increased, home prices rose at a slower rate, new home sales rebounded, consumer confidence firmed, household inflation pressures moderated, and hurricane Florence’s effect on initial jobless claims was smaller than anticipated. As for the negatives, the nation’s trade deficit (in goods) widened, pending home sales fell, the 30-year mortgage rate jumped to the highest level since 2011, consumer spending growth cooled, core durable goods orders disappointed forecasts, an important measure of business spending unexpectedly declined, and gauges of regional manufacturing activity continued to send mixed signals. This week the pace of economic data remains elevated, with several important reports on manufacturing, the U.S. services sector, and employment scheduled to be released, along with the potentially market-moving September job report from the Bureau of Labor Statistics due out on Friday.

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**A more detailed snapshot of the U.S. economy can be found here.**

What To Watch:

Monday

Tuesday

Wednesday

Thursday

Friday

  


 

Sources: Econoday, FRBG, FRBSL

Post author: Charles Couch

Disclosures