Markets, Economy

Weekly Kickstart (01/29/2018-02/02/2018)

1/29/18 8:00 AM

/iStock-637764102.jpgThe market melt-up accelerated last week, as the S&P 500 jumped by 2.23 percent to 2,872.87, another all-time closing high. In fact, the benchmark index has closed at a new record 14 times this year (84 since the Presidential election), and now sits with a year-to-date gain of 7.45 percent. That is one of the best starts to a year since 1987. However, bullish sentiment last week fell to the lowest level since mid-December, according to the latest AAII data. Does this mean that investors are losing faith in the stock market? Not necessarily because bearish sentiment is up only fractionally from its recent low, and global stock mutual funds and exchange-traded funds this month have experienced one of their largest inflows on record.


Several market dynamics, though, have been a bit unusual lately. For example, the CBOE’s VIX volatility index, often referred to as “investors’ fear gauge,” has risen alongside equities for much of January. This somewhat rare occurrence can typically be explained by more investors buying put options as a form of downside protection for their profits, but this time call options seem to be receiving a noticeably stronger bid than puts. Some traders will view this as another sign of investor euphoria and irrational exuberance, but history has repeatedly shown that trying to perfectly time a top in the market is extremely difficult if not impossible. Regardless, anyone worried about his or her portfolio’s exposure to a potential selloff should consider consulting with a professional financial advisor and 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 mortgage and refinance applications rose, demand for U.S.-manufactured durable goods improved, and first-time claims for unemployment benefits held near a multi-decade low. As for the negatives, existing home sales slid, new home sales fell, housing inflation remained elevated, core capital expenditures unexpectedly declined, and U.S. gross domestic product growth during the fourth quarter of 2017 expanded by less than anticipated. This week the pace of economic data picks up slightly, with several important reports on manufacturing, consumers, productivity, inflation, and employment scheduled to be released, including the potentially market-moving January job report from the Bureau of Labor Statistics on Friday.


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

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Sources: Econoday, Twitter, Bespoke Investment, Zerohedge, Bloomberg, WSJ, BofAML, FRBSL

Post author: Charles Couch