Markets, Economy

Weekly Kickstart (10/10/2016-10/14/2016)

10/10/16 8:00 AM

iStock_000000499785_Small-1Stocks fell last week, with the S&P 500 declining by 0.67 percent to 2,153.74. Despite this loss, the benchmark index is still up 5.37 percent 2016-to-date, and just 1.66 percent below the all-time closing high hit in August. In the previous Weekly Kickstart we mentioned that the S&P 500 ended the month of September with a 0.12 percent loss but new data from the Employee Benefit Research Institute (EBRI) showed that the average account balance for younger (ages 25-34), less-tenured (1-4 years with employer) 401(k) participants actually climbed by 2.0 percent during this same period. Even older (ages 55-64) workers with more seniority (20-29 years of tenure) saw their average account balance rise by 0.4 percent in September, reflecting these larger accounts’ greater sensitivity to stock market fluctuations than plan contributions. Since average 401(k) balances also rose in July and August, many participants are likely in store for a nice surprise when they receive their quarterly (Q3) account statement.


Volatility picked up last week as investors had a deluge of economic data and other headlines to react to, including a spike in the price of oil, hurricane Matthew, heightened tensions with Russia, concerns about the capital position of Deutsche Bank, and a gloomy outlook for the global economy from the International Monetary Fund (IMF). Somewhat disappointing employment data from the Bureau of Labor Statistics (BLS) also contributed to the swings in the stock market last week. Interestingly, the softer job report might have been exactly what officials at the Federal Reserve were hoping for because it removed any pressure that might have been on them to hike at the next Federal Open Market Committee (FOMC) meeting (November 1st-2nd), scheduled just a few days before the Presidential election (November 8th). As a result, the market now expects that if the Fed does move in 2016, it will be in December. 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 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 a few of the things we learned about the U.S. economy last week, the positives included that mortgage and refinance applications rose, motor vehicle sales increased, services sector activity rebounded, and the number of Americans making first-time claims for unemployment benefits fell to a near-record low. As for the negatives, the nation’s trade deficit widened, construction spending unexpectedly declined, U.S. factory orders fell for the 22nd month in a row, gauges of national manufacturing activity continued to send mixed signals, corporate layoff announcements jumped, small business hiring slowed for the 5th straight month, consumers’ reported confidence in the labor market cooled, and the official unemployment rate ticked higher. This week the pace of economic data slows down but there are still several important reports on inflation, consumers, employment, and small business scheduled to be released, along with the potentially market-moving minutes from the last FOMC meeting due out this Wednesday.


What To Watch:









Sources: Econoday, NAPA, EBRI, WSJ, Twitter, Advisor Perspectives, FRBSL

Post author: Charles Couch