Markets, Economy

Weekly Kickstart (12/05/2016-12/09/2016)

12/5/16 8:00 AM

iStock_000000499785_Small-1The market melt-up took a pause last week, with the S&P 500 falling by 0.97 percent to 2191.95. Despite this small loss, the benchmark index is still up 7.24 percent year-to-date, and 0.08 percent above the previous all-time closing high hit in August. As for performance during the month of November, the S&P 500 climbed by 3.42 percent, and other major indices were propelled by similar gains to record levels. Americans’ retirement assets also fared well last month, according to new data from the Employee Benefit Research Institute (EBRI). Specifically, the mean 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers rose by 4.0 percent in November, twice the gain seen in September, and older (55-64) employees with longer-tenures (20-29 years) experienced a 1.4 percent increase on average, more than erasing the 1.1 percent loss recorded in October. Looking ahead, the stock market has historically outperformed in December and January. Should this seasonal pattern hold true over the next two months that would be good news for consistent 401(k) participants.


However, last week’s slight pullback suggests that many investors have likely grown concerned that the November surge in stock valuations might have been a bit overdone. That is not too surprising since the market just experienced its largest 5-week inflow into equity funds since October 2013 based largely on the positive expectations for the fiscal and tax policies to be pursued by President-elect Donald Trump, who has yet to even be sworn into office. Several prominent fund managers have echoed such sentiment recently, while others believe the post-election rally still has room to run. The latter viewpoint is supported by improving economic data and an OPEC deal that should be supportive of oil prices (energy stock valuations). There is of course no guarantee that equities continue to go straight up from these elevated levels, which is why for retirement investors the focus should be less on the near-term fluctuations in the market and more on their long-term goal of wealth accumulation. This involves trusting the resiliency of the stock market and staying on the lookout for potential buying opportunities. Such efforts can be enhanced with the 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.


To recap a few of the things we learned about the economy last week, the positives included that corporate profits jumped, measures of both national and regional manufacturing activity rebounded, U.S. gross domestic product (GDP) growth in the third quarter of 2016 expanded by more than previously estimated, personal income growth improved, consumer confidence firmed, private-sector hiring rose, layoff announcements decreased, and the unemployment rate in America fell to a new recovery low. As for the negatives, mortgage and refinance applications declined, small business job creation remained weak, inflation pressures ticked higher, consumer spending moderated, first-time claims for unemployment benefits spiked, and average hourly earnings unexpectedly fell. This week the pace of economic data slows down but there are still several important reports on consumers, services sector activity, productivity, and employment scheduled to be released.


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Sources: Econoday, Twitter, Bloomberg, Advisor Perspectives, BofAML, Pension Partners, FRBSL

Post author: Charles Couch