Markets, Economy

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

11/7/16 8:00 AM

iStock_000000499785_Small-1Stocks headed lower last week, with the S&P 500 falling by 1.94 percent to 2,085.18. In fact, the benchmark index has now fallen for nine days in a row, its longest losing streak since 1980. A 0.01 percent decline on Monday left the S&P 500 with a loss of 1.94 percent for the month of October but new data from the Employee Benefit Research Institute (EBRI) suggests that Americans’ retirement assets generally fared much better. Specifically, the mean 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers actually rose by 0.4 percent in October, and older (55-64) employees with longer-tenures (20-29 years) experienced only a 1.1 percent loss on average. Moreover, the S&P 500 is still up 2.02 percent 2016-to-date and just 4.79 percent below the all-time closing high hit in August. Looking ahead, the stock market has historically performed well in November, December, and January. Should this seasonal pattern hold true over the next three months that would be good news for consistent 401(k) participants.


As for what moved the stock market last week, there were several issues weighing on equities during the past five trading sessions, including weakness in the price of oil and continued uncertainty surrounding the upcoming U.S. Presidential election. Another event last week that traders were paying attention to was the latest decision on monetary policy from the Federal Open Market Committee (FOMC). Indeed, officials on Wednesday announced that the target range for the Federal funds rate would be left unchanged at 0.25 percent to 0.50 percent. It was widely anticipated that the Federal Reserve (Fed) would opt to hold steady with rates in October but officials in the statement noted that “the case for raising the Fed funds rate has continued to strengthen.” That increased the likelihood of a hike occurring at the December FOMC meeting and was supported by comments from Federal Reserve Bank of Atlanta president Dennis Lockhart on Friday, which stressed that “there is a relatively high bar, at least in pure economic terms, to not moving in December.” Clearly there are a lot of potential near-term headwinds for equities but retirement investors should trust the resiliency of the stock market and focus more on long-term wealth accumulation. Such efforts can be enhanced by utilizing 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.


To recap a few of the things we learned about the U.S. economy last week, the positives included that the nation’s trade gap narrowed, motor vehicle sales increased, services sector activity firmed, factory orders rose, productivity growth rebounded, corporate layoff announcements moderated, the underemployment rate fell, Americans’ disposable personal income grew by more than forecast, and annual wage growth climbed to a recovery high. As for the negatives, mortgage and refinance applications declined, constructing spending contracted, measures of both national and regional manufacturing activity continued to send mixed signals, consumer inflation pressures firmed, initial jobless claims unexpectedly jumped, small business job creation moderated, and nonfarm payrolls growth disappointed forecasts. This week the pace of economic data slows down but there are still several important reports on consumer credit, employment, and small business optimism scheduled to be released, along with the potentially market-moving results of the Presidential election due out some time tomorrow night.


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Sources: Econoday, Twitter, Bloomberg, Advisor Perspectives, Wells Fargo, FRBG

Post author: Charles Couch