Markets, Economy

Weekly Kickstart (03/26/2018-03/30/2018)

3/26/18 8:00 AM

/iStock-815194132.jpgStocks remained under pressure last week, as the S&P 500 fell by 5.95 percent to 2,588.26. That was the largest drop in more than two years, and a big enough decline to turn the benchmark index’s 2.93 percent year-to-date gain into a 3.19 percent loss. Concerns about trade relations and a potential government shutdown drove market volatility last week. The latter has already been resolved, while the former remains a major unknown (risk) for investors. Since a full-on trade war is still avoidable, the way this situation develops could determine just how severe (or short-lived) the latest pullback in the market ultimately is. Another issue that investors were paying close attention to last week was the latest announcement on monetary policy from the Federal Open Market Committee (FOMC). Indeed, officials on Wednesday raised the target range for the federal funds rate to 1.50-1.75 percent, the 6th hike since the central bank started gradually tightening monetary policy in 2015.


The committee this month also updated its quarterly economic projections, with highlights being an upgraded forecast for both 2018 and 2019 real GDP growth, as well as sharply lower unemployment expectations. However, the committee’s long-run economic growth forecast was left unchanged, suggesting that officials remain skeptical about whether the recent tax cuts will provide anything more than a temporary boost. Jerome Powell, though, during his first press conference as Fed Chair said that he believes the tax cuts should “encourage business investment and productivity.” As for inflation, the committee’s projections were little-changed, and Chair Powell added that “there is no sense in the data that we're on the cusp of an acceleration in inflation.” Altogether, the latest FOMC announcement implies another two quarter-point rate increases in 2018, three in 2019, and two in 2020. Current market pricing suggests that the next hike will likely occur at the June FOMC meeting. What all of this means for equities in the near-term remains unclear but for retirement investors, the focus should continue to be 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 existing home sales rose by more than expected, demand for U.S.-manufactured durable goods rebounded, and first-time claims for unemployment benefits held near a half-century low. As for the negatives, the nation’s current account deficit widened, mortgage and refinance applications fell, housing inflation picked up, and new home sales growth softened. This holiday-shortened week the pace of economic data remains slow but there are still a few important reports on manufacturing, consumers, and household inflation scheduled to be released.


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

What To Watch:






  • Good Friday



Sources: Econoday, U.S. FRBG, Wells Fargo, Bloomberg, Twitter, CME, FRBSL

Post author: Charles Couch