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Stocks End Up After Busy Week

November 07, 2017 at 8:15 AM

 

Once again, the markets ended the week in positive territory—and all 3 major domestic indexes hit new record highs. The S&P 500 added 0.26%, and the Dow was up 0.45%, with both indexes notching their 8th straight week of growth. The NASDAQ was up for the 6th week in a row with a 0.94% gain.[i] International stocks in the MSCI EAFE joined in the growth, posting a 0.90% increase.[ii]

                                                       

Why did markets continue to perform well last week? In part, economic data, political developments, and policy decisions gave investors a variety of details to digest.

Perspectives We Gained Last Week 

  1. Tax Reform

The House of Representatives released a long-awaited tax-reform bill on November 2, which included a number of changes to current laws. If passed, this legislation would reduce the corporate tax rate to 20% while cutting in half the mortgage-interest deduction.[iii] The markets responded positively to the bill, in part because of the level of detail it included.[iv]

Key Takeaway: This tax reform could be significant, but it must pass through several steps ahead before becoming law.

 

  1. Monetary Policy

The Federal Reserve opted to keep interest rates at their current level for now. In addition, President Trump nominated Jerome Powell to be the new Fed Chair when Janet Yellen’s term ends next February.

Key Takeaway: Many people expect one more interest rate increase this year. And if the Senate confirms Powell’s nomination, the Fed may stay with the same centrist approach to monetary policy as in recent years.[v]

 

  1. Jobs

After hurricanes contributed to disappointing jobs data for September, the most recent reading showed improvements in hiring. October saw the economy add 261,000 new jobs—below the predicted 313,000—but positive growth, nonetheless. In addition, we received revised data for September, which indicated the economy gained 18,000 jobs during that month, rather than losing the previously reported 33,000.

Key Takeaway: Hurricanes continue to affect jobs data, but unemployment is now lower than it has been since 2001.[vi]

 

  1. Business

The most recent ISM non-manufacturing data shows that many businesses in the service sector are growing. In October, these industries—which range from construction to agriculture—grew at the fastest rate since 2005.

Key Takeaway: With business activity and new orders on the rise, we may expect to see service-sector expansion continue in future months.[vii]

 

After last week’s wealth of data and developments, this week’s schedule is relatively quiet. We will continue to monitor incoming details and determine how they may affect our clients’ financial lives. In the meantime, if you have any questions, we are always here to talk.

 

EconomicCalendar

Tuesday: JOLTS
Wednesday: EIA Petroleum Status Report

Thursday: Jobless Claims

Friday: Consumer Sentiment

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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia.

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

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