Markets, Economy

Weekly Kickstart (12/18/2017-12/22/2017)

12/18/17 8:00 AM

/iStock-815194132.jpgThe market melt-up continued last week, as the S&P 500 rose by 0.92 percent to 2,675.81. That was another new all-time closing high that left the benchmark index with an outstanding 19.52 percent year-to-date gain. Although much of last week’s rally was due to tax reform progress, another major event that traders were paying close attention to was the latest decision on monetary policy from the Federal Open Market Committee (FOMC). Indeed, officials on Wednesday raised the target range for the federal funds rate to 1.25-1.50 percent, the third quarter-point hike this year. The committee also updated its quarterly economic projections, with one highlight being a sharply upgraded estimate for gross domestic product (GDP) growth in 2018. However, the committee’s long-run growth forecast was left unchanged, suggesting that officials for now are skeptical the current tax package making its way through Congress will provide anything more than a temporary economic boost.


As for employment, the Fed committee no longer explicitly stated that it expects the labor market to “strengthen further,” and instead said that monetary policy going forward will help the labor market “remain strong.” That suggests officials anticipate the pace of improvement in the job market to start to slow, not surprising this late in the economic cycle. Altogether, the updated Fed projections now imply another three quarter-point rate increases in 2018, and current market pricing suggests that the first of these hikes will occur in March. What all of this means for equities in the near-term remains unclear but for retirement investors, the focus should instead be on the long-term goal of amassing significant 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 retail sales jumped, small business owner confidence surged to a near-record high, industrial production expanded, capacity utilization increased, the approval rate for SMB loans rose, the number of unemployed Americans per job opening slid to an all-time low, the ratio of quits to layoffs and discharges lifted to the best reading in more than a year, first-time claims for unemployment benefits held near a multi-decade low, and household inflation pressures moderated. As for the negatives, mortgage and refinance applications fell, manufacturing activity in the Northeast region of the country cooled, wholesale price pressures rose, and total job openings unexpectedly declined. This week the pace of economic data slows down but there are still a few important reports on housing, manufacturing, consumers, and inflation scheduled to be released.


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

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Sources: Econoday, U.S. FRBG, Bloomberg, FRBSL

Post author: Charles Couch