Markets, Economy

Weekly Kickstart (09/23/2019-09/27/2019)

9/23/19 8:00 AM

iStock-626627280.jpgStocks pulled back last week, as the S&P 500 fell by 0.51 percent to 2,992.07. That still left the benchmark index up 19.36 percent 2019-to-date, and just 1.12 percent below the all-time closing high. The price action during the past few trading sessions was not too surprising given that equities had just posted their largest 3-week rally since early June, and there was yet another deluge of economic data and other news headlines for investors to react to. For example, oil market volatility has spiked due to a significant output disruption in Saudi Arabia and it remains unknown how long the production slowdown will last. The uptick in oil prices so far seems more than manageable but should it intensify the hit to consumers and businesses could start to weigh on the broader stock market. Elsewhere, a more immediate issue that traders were paying attention to last week was the September announcement on monetary policy from the Federal Open Market Committee (FOMC). Indeed, officials on Wednesday lowered the target range for the federal funds rate to 1.75-2.00 percent, the second 25 basis points cut in a row following more than a decade without any easing.

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With a record-length economic expansion, a record 107 consecutive months of job growth, core CPI near a cycle high, and stock prices near record levels it may seem unnecessary for the Fed to continue cutting rates. One possible interpretation of last week’s policy move could therefore be that it was an indication from officials that they are willing to proceed with multiple “insurance cuts” to get ahead of any potential negative spillovers from the trade war or contagion from economic weakness overseas. Updated FOMC projections, though, suggest there is a lot of internal debate in the committee about how to proceed with monetary policy, and the latest “dot plot” implies that the market is expecting more easing in the future than officials are signaling at present. Moreover, monetary policymakers already admitted that the trade war and other sources of uncertainty could be holding back business investment in America, so they should not be surprised if a perceived lack of consensus at the Fed becomes another growth headwind. What all of this means for equities in the near-term remains unclear but for regular investors the focus should continue to be on the long-term goal of amassing a large retirement nest egg. Additional assistance is available through the use of dollar-cost averaging and regularly consulting with a professional financial advisor. As always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that home purchase applications picked up, existing home sales rose, housing starts jumped, building authorizations increased, homebuilder confidence firmed, industrial production rebounded, capacity utilization improved, and the number of Americans making first-time claims for unemployment benefits held near a half-century low. As for the negatives, gauges of manufacturing activity in the Northeast and Mid-Atlantic regions of the country deteriorated. This week the pace of economic data picks up slightly with a few important reports on factory output, housing, employment, consumers, and inflation scheduled to be released, along with a handful of speeches from Federal Reserve officials.

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What To Watch:

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Sources: Econoday, FRBG, FRBSL

Post author: Charles Couch

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