Markets, Economy

Weekly Kickstart (10/03/2016-10/07/2016)

10/3/16 8:00 AM

iStock_000000499785_Small-1Stocks edged higher last week, with the S&P 500 rising by 0.17 percent to 2,168.27. This fractional gain was not enough to prevent the benchmark index from finishing last month with a 0.12 percent loss but that is not too bad considering that September has historically been the worst month for equities. Quarterly performance was much better because the S&P 500 posted a solid gain of 3.31 percent in Q3, and ended the 3-month period up 6.08 percent 2016-to-date and just 1.00 percent below the all-time closing high hit in August. Volatility picked up slightly last week but retail investors should not try to read too deeply into the price action because end-of-quarter trading is often quite noisy and dominated by large, institutional money managers adjusting their positioning, i.e. window dressing.


However, there were a few noteworthy issues exacerbating the swings in the market last week, such as concerns about the capital position of Deutsche Bank, volatility in the price of oil, and continued uncertainty surrounding the Fed’s timetable for interest rate normalization. Congress has also been in the spotlight recently, with lawmakers last week finally passing, just a few days before the end of fiscal year 2016, a short-term resolution to keep the federal government funded until December 9th. Following the Presidential election, Congress will return from recess on November 14th to try to hammer out a more substantial budget deal but many analysts simply expect another short-term continuing resolution to keep the government funded until mid-March, at which point the 115th Congress will be forced to finally address federal funding and the debt ceiling. Such issues are important but for retirement investors the focus should remain on the long-term goal of building wealth through consistent participation in an employer-sponsored 401(k) plan. 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.


To recap what we learned about the U.S. economy last week, the positives included that the nation’s trade deficit narrowed, regional manufacturing activity rebounded, demand for American-manufactured durable goods was slightly better than expected, initial jobless claims remained near historic lows, measures of consumer sentiment improved, and gross domestic product (GDP) growth in the second quarter of 2016 was revised higher. As for the negatives, mortgage and refinance applications slid, new home sales declined, pending home sales fell, consumer spending growth stalled, and the Fed’s preferred measure of inflation climbed to a nearly 2-year high. This week the pace of economic data remains elevated, with lots of important reports on manufacturing, services sector activity, consumers, and employment scheduled to be released, along with the potentially market-moving September job report from the Bureau of Labor Statistics (BLS) due out this Friday.


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Sources: Econoday, Bloomberg, WSJ, CNBC, Twitter, FRBG, Advisor Perspectives

Post author: Charles Couch