Markets, Economy

Weekly Kickstart (04/10/2017-04/14/2017)

4/10/17 8:00 AM

/iStock-488690713.jpgStocks were little-changed last week, with the S&P 500 falling by just 0.30 percent to 2,355.54. Despite the small loss, the benchmark index is still up 5.21 percent year-to-date, and just 1.69 percent below the all-time closing high. However, volatility picked up slightly during the past five trading sessions, due in part to a plethora of headlines for investors to react to, including several important reports on the domestic economy and various geopolitical developments overseas. The minutes from the latest Federal Open Market Committee (FOMC) meeting were also released last week, which confirmed that officials remain determined to normalize monetary policy even in the face of another disappointing quarter for economic growth. Indeed, U.S. gross domestic product (GDP) growth has recently started each new year off on a soft note, and the latest projections suggest that 2017 is not going to be any different. For example, the Federal Reserve Bank of Atlanta now forecasts that GDP expanded by just 0.6 percent in Q1, which if turns out to be true would be the lowest quarterly GDP growth recorded in three years.


The minutes, though, also revealed that many Fed officials believe the latest economic slowdown will only be temporary. Such optimism is not too surprising since there are signs that U.S. businesses are starting to invest once again, and that the labor market remains strong, e.g. the unemployment rate continues to decline even as participation has stabilized. Add to all of that the slow but steady rise in inflation pressures and the potential for some sort of fiscal stimulus from Congress and the new administration and it is understandable why the Fed committee has not been deterred by recent economic weakness. In fact, the FOMC minutes even hinted at the possibility the Fed will start unwinding a portion of its $4.5 trillion balance sheet later this year, a hawkish move that many market participants did not expect would be brought up so soon. As important as such issues are, retirement investors with relatively long time horizons should still focus less on the near-term path of monetary policy and more on building wealth through consistent participation in the highly resilient stock market. Those 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 the nation’s trade deficit narrowed, consumer credit utilization rebounded, construction spending improved, private-sector job creation jumped (led by small business hiring), first-time claims for unemployment benefits fell sharply, and measures of both unemployment and underemployment in America slid to cycle lows. As for the negatives, mortgage and refinance applications declined, gauges of national manufacturing activity pulled back from their post-election highs, services sector activity moderated, corporate layoff announcements increased, average hourly earnings rose by less than forecast, and nonfarm payrolls growth slowed considerably. This holiday-shortened week the pace of economic data slows down but there are still several important reports on employment, consumers, inflation, and retail sales scheduled to be released, along with the latest update on small business owner optimism from the National Federation of Independent Business (NFIB) due out tomorrow morning.


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

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Sources: Econoday, Bloomberg, Wells Fargo, Goldman Sachs, FRBA, FRBSL

Post author: Charles Couch