Markets, Economy

Weekly Kickstart (10/30/2017-11/03/2017)

10/30/17 8:00 AM

/iStock-637764102.jpgThe market melt-up continued last week, as the S&P 500 rose by 0.23 percent to 2,581.07. That is another new all-time closing high which left the benchmark index up a solid 15.29 percent year-to-date. Equities actually fell sharply on Wednesday due in part to heightened uncertainty about whether Congress will limit the amount of money Americans can contribute each year to tax-advantaged 401(k) plans. All of those losses, though, were erased by the end of the week thanks to strong tech earnings and increased optimism about tax reform. However, with stocks still at record levels even as volatility is potentially picking up, it would not be too surprising if some market participants want to make adjustments to their holdings. Forty-one percent of retail investors recently surveyed by AMG Funds even said that they rebalance their portfolios at least once every quarter but other responses put their reasoning for doing so into question.


For example, not even one in ten surveyed investors were familiar with popular market risk measures such as beta and standard deviation, and only 19 percent said they are aware that proper diversification requires investing across not just a broad selection of equities but also across asset classes. Moreover, only 42 percent of respondents could actually explain why diversification is important, and just one in five investors said that they are concerned about diversification in their own portfolios. Age-related differences were also present, as surveyed Millennials were roughly four times more likely than Baby Boomers to describe themselves as being “extremely or very knowledgeable” investors even though Gen-Y respondents’ understanding of diversification concepts was much weaker compared to older investors. Jeffrey T. Cerutti, CEO of AMG Funds, added that such responses “highlight the ongoing need for professional financial advice, even though investors may not fully recognize its worth.”


To recap a few of the things we learned about the economy last week, the positives included that new home sales surged, regional manufacturing activity continued to expand, demand for U.S.-manufactured durable goods jumped, core capital expenditures rose, consumer sentiment improved, the number of Americans making first-time claims for unemployment benefits held near a 44-year low, and gross domestic product (GDP) during the third quarter of 2017 grew by more than expected. As for the negatives, mortgage and refinance applications declined, pending home sales growth slowed, and housing inflation intensified. This week the pace of economic data picks up with several important reports on manufacturing, consumers, inflation, employment, and monetary policy scheduled to be released, along with the potentially market-moving October job report from the Bureau of Labor Statistics (BLS) due out on Friday.


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

What To Watch:








Sources: Econoday, AMG Funds, FRBSL

Post author: Charles Couch