Markets, Economy

Weekly Kickstart (03/19/2018-03/23/2018)

3/19/18 8:00 AM

/iStock-637764102.jpgStocks were under pressure last week, as the S&P 500 fell by 1.24 percent to 2,752.01. That small loss still left the benchmark index up 2.93 percent year-to-date, and just 4.21 percent below the all-time closing high. Most of weakness was due to continued uncertainty about whether recent trade skirmishes will turn into a full-on trade war. Since the outcome is still unknown, stocks are likely to remain sensitive to every headline out of Washington. That does not necessarily mean that market will not be able to continue to push higher and retest the record levels seen earlier in the year but rather that continued large swings in equity valuations would not be surprising. Hopefully retail investors are better prepared for such an uptick in volatility than they were during other recent periods of market tumult. For example, on February 5th, the S&P 500 plunged by more than 4 percent, its biggest one-day loss since Standard & Poor's cut the rating on U.S. sovereign debt from AAA to AA+.


The net trading activity in 401(k) accounts on that Monday last month was almost 12 times what would occur on a typical day, according to data from Alight Solutions. There have only been a handful of days with higher average daily activity during the past two decades, and trading activity was almost exclusively from equities into fixed income. Fast forward to Friday of that same week and the S&P 500 was down almost 2 percent at one point before rallying back to end the day deep in positive territory. 401(k) investors, though, on average remained net sellers of equities for what proved to be the interim bottom in the market. Moreover, 401(k) trading volumes did not return to normal until the 16th of February, when the market had already bounced 8 percent off the panic lows. This is just one of many examples of why retirement investors should focus less on near-term market fluctuations and more on the long-term goal of amassing wealth. Assistance with that endeavor is available through the consistent 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 manufacturing activity in the northeast region of the country expanded at a faster pace, industrial production jumped, capacity utilization rose, small business owner optimism strengthened, consumer sentiment improved, the total number of job openings in America lifted to a new all-time high, and initial jobless claims held near a half-century low. As for the negatives, refinance applications decreased, housing starts declined, building permits fell, homebuilder sentiment cooled, manufacturing activity in the Mid-Atlantic region of the country expanded at a slower pace, inflation pressures remained elevated, and retail sales grew by less than forecast. This week the pace of economic data slows down considerably but there are still a few important reports on housing and manufacturing scheduled to be released, along with the potentially market-moving announcement on monetary policy this Wednesday from the Federal Open Market Committee (FOMC).


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

What To Watch:








Sources: Econoday, Alight Solutions, FRBSL

Post author: Charles Couch