Markets, Economy

Weekly Kickstart (12/03/2018-12/07/2018)

12/3/18 8:00 AM

iStock-626627280.jpgStocks rebounded last week, as the S&P 500 rose by 4.85 percent to 2,760.17. That was the largest gain in seven years and it left the benchmark index up 3.24 percent 2018-to-date, and just 5.82 percent below the record close. As we explained a week ago, stocks were by some measures oversold and therefore eager for a reason to bounce. The catalyst this time came from the Federal Reserve, as a handful of speeches by monetary policymakers hinted that the pace of tightening may slow. For example, Fed chairman Jerome Powell on Wednesday said that interest rates “remain just below the broad range of estimates of the level that would be neutral for the economy‑‑that is, neither speeding up nor slowing down growth.”


Compare that to October 3rd when chairman Powell said that “We may go past neutral. But we’re a long way from neutral at this point, probably.” The knee-jerk surge in the market following chairman Powell’s speech suggests that investors interpret the subtle change in wording as a sign that Fed officials have become more open to pausing their series of hikes. Another quarter-point increase, though, is still widely expected to occur at this month’s Federal Open Market Committee meeting, but traders will now be looking for additional indications that fewer hikes may be necessary in 2019. Some recent economic developments could help officials tone down the hawkish rhetoric and justify a slower pace of hikes in the year ahead, but many unknowns remain. There is also a lot of uncertainty still surrounding U.S. trade policy and corporate earnings growth, so stock market volatility may not be going away any time soon. Retail investors concerned about navigating this environment should consider consulting with a professional financial advisor and 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 home prices rose at a slower rate, mortgage applications increased, personal incomes improved, consumer spending strengthened, and household inflation pressures cooled. As for the negatives, the nation’s trade deficit (in goods) widened, economic confidence moderated, new home sales declined, pending home sales fell, several gauges of regional factory activity weakened, and first-time claims for unemployment benefits jumped to a 6-month high. This week the pace of economic data picks up slightly, with several important reports on manufacturing, the U.S. services sector, productivity, and employment scheduled to be released. That includes the potentially market-moving November job report from the Bureau of Labor Statistics due out on Friday.


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

What To Watch:








Sources: Econoday, FRBG, Bloomberg, FRBSL

Post author: Charles Couch