Stocks Muted, Big Week Ahead

The Weekly Update

Week of January 28, 2019
By Christopher T. Much, CFP®, AIF®

For the first time in months, U.S. markets experienced little movement last week. The Dow and NASDAQ did have their 5th week of gains in a row, but their increases were small: 0.12% and 0.11%, respectively. Meanwhile, the S&P 500 broke its 4-week winning streak with a 0.22% loss. Internationally, the MSCI EAFE also posted modest returns, gaining 0.47% for the week.

What topics were on investors’ minds?

Despite the relative lack of market drama last week, investors still had plenty to consider. For example, the following details emerged:

  • Conflicting messages came out on trade tension with China.
  • The International Monetary Fund (IMF) downgraded its forecast for global growth.
  • Corporate earnings season continued.

In addition, the longest Federal government shutdown in history ended. After 35 days, the House and Senate voted unanimously to reopen the partially closed government. President Trump signed the bill, which includes funding through February 15.

This week could provide far more action in the markets when a number of key details emerge.

What’s ahead this week?

These last days of January provide several noteworthy updates, including:

  • Federal Reserve Meeting: Most people expect that the Fed will not increase rates this week. However, many investors will be studying how the central bank describes its plans for 2019 and assessment of the economy’s strength.
  • Corporate Earnings: This week, 126 S&P 500 companies will release their earnings data. Major reports could help provide insight into everything from U.S. consumers to global industry.
  • China Negotiations: Chinese Vice Premier Liu and his delegation are coming to Washington to conduct additional trade discussions. As we have discussed for months, the ongoing tension is affecting markets as investors look for clarity on what may lie ahead.

One data point we may not receive this week is the initial reading of 4th quarter 2018 Gross Domestic Product. This report is one of many affected by the Federal government shutdown. Although the government has reopened, we have yet to receive the latest data on retail sales, new home sales, durable goods orders, and more.

As the week unfolds, we will analyze all of the information that does come out—and continue to look for ways to pursue our clients’ long-term goals in the current economic environment. If you have any questions about how these details affect your financial life, we’re here to talk.

ECONOMIC CALENDAR*:
Tuesday: Consumer Confidence
Wednesday: ADP Employment Report, GDP
Thursday: Jobless Claims
Friday: Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg Index, Construction Spending, Consumer Sentiment

*The Federal government shutdown may delay some data releases.

Past performance is no guarantee of future results. Data collected from Investors FastTrack software.
https://www.bloomberg.com/news/articles/2019-01-25/u-s-stocks-in-no-man-s-land-after-first-sideways-week-of-2019
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.reuters.com/article/us-usa-stocks/wall-street-advances-on-washington-temporary-shutdown-deal-idUSKCN1PJ1GK
https://www.msci.com/end-of-day-data-search
https://www.bloomberg.com/news/articles/2019-01-25/u-s-stocks-in-no-man-s-land-after-first-sideways-week-of-2019
https://www.npr.org/2019/01/25/688414503/watch-live-trump-addresses-shutdown-from-white-house-rose-garden
https://www.bloomberg.com/news/articles/2019-01-25/u-s-stocks-in-no-man-s-land-after-first-sideways-week-of-2019
https://www.marketwatch.com/story/investors-brace-for-action-packed-trading-as-stocks-ride-into-the-eye-of-the-fed-storm-2019-01-26?dist=markets
https://www.marketwatch.com/story/investors-brace-for-action-packed-trading-as-stocks-ride-into-the-eye-of-the-fed-storm-2019-01-26?dist=markets
https://www.bloomberg.com/news/articles/2019-01-25/u-s-stocks-in-no-man-s-land-after-first-sideways-week-of-2019
https://www.bloomberg.com/news/articles/2019-01-25/u-s-stocks-in-no-man-s-land-after-first-sideways-week-of-2019
https://www.marketwatch.com/story/investors-brace-for-action-packed-trading-as-stocks-ride-into-the-eye-of-the-fed-storm-2019-01-26?dist=markets
https://us.econoday.com/byshoweventfull.asp?fid=498816&cust=us&year=2019&lid=0&prev=/byweek.asp#top
https://www.bloomberg.com/graphics/2019-shutdown-data-delay/
Stocks Muted, Big Week Ahead2019-01-28T13:12:16-04:00

The Rally Continues

The Weekly Update

Week of January 21, 2019
By Christopher T. Much, CFP®, AIF®

U.S. markets were up again last week, as major domestic indexes posted their 4th weekly gains in a row. In fact, the S&P 500 was no longer in correction territory at Friday’s close—and was in the middle of its best yearly start since 1987.

For the week, the S&P 500 gained 2.87%, the Dow added 2.96%, and the NASDAQ increased by 2.66%. So far, all three indexes are up more than 5% in 2019. Internationally, the MSCI EAFE also ended the week in positive territory, posting a 1.06% gain.

What is driving the rally?

Once again, developments in our ongoing trade negotiations with China contributed to the performance. On Thursday, a report emerged that the U.S. was weighing whether to lift tariffs on Chinese imports. However, the Treasury Department said Secretary Steve Mnuchin had not recommended this action. Then, on Friday, Bloomberg released news that China may raise its imports to a level that would close the trade deficit by 2024. This potential sign of progress contributed to the day’s market gains.

While these trade updates significantly affected stock performance last week, the following details are also worth noting:

  1. Corporate earnings season started.
    So far, 11% of S&P 500 companies have released their earnings reports for the 4th quarter of 2018. As expected, growth is not as fast as in the last year’s previous quarters, but total earnings are still up 16.9% over the same period in 2017. We are very early in earnings season but anticipate data from another 56 companies coming out this week.
  2. Consumer sentiment missed expectations.
    The latest consumer sentiment reading fell to its lowest level since 2016, yet it still remains relatively high. This decline could signal that the current impasse over border-wall funding and the volatile markets are negatively affecting the economy.
  3. Manufacturing beat projections.
    The latest data showed that U.S. manufacturing output increased by 1.1% in December. This rate exceeded expectations and may help calm concerns that factory production is slowing.
  4. The government shutdown continued.
    Since December 22, parts of the Federal government have been closed, marking the longest shutdown in U.S. history. Economists estimate that each week the shutdown continues could reduce our quarterly growth of Gross Domestic Product by up to 0.2%.

Looking ahead, we will not only have earnings data to consider in this shortened trading week, but also information on home sales and durable goods orders. We’ll continue to monitor economic reports—and geopolitical developments—as we support each client’s long-term goals. As always, if you have questions or concerns, we’re here for you.

ECONOMIC CALENDAR:
Monday: Markets Closed for Martin Luther King Jr. Day
Tuesday: Existing Home Sales
Thursday: Jobless Claims
Friday: Durable Goods Orders, New Home Sales

Past performance is no guarantee of future results. Data collected from Investors FastTrack software.
https://www.reuters.com/article/us-usa-stocks/wall-street-extends-rally-on-u-s-china-trade-optimism-idUSKCN1PC1FH
https://www.cnbc.com/2019/01/18/stocks-us-china-trade-talks-take-center-stage-shutdown-earnings.html
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.msci.com/end-of-day-data-search
https://www.reuters.com/article/us-usa-stocks/wall-street-extends-rally-on-u-s-china-trade-optimism-idUSKCN1PC1FH
https://www.bloomberg.com/news/articles/2019-01-18/china-is-said-to-offer-path-to-eliminate-u-s-trade-imbalance
https://www.cnbc.com/2019/01/18/stocks-us-china-trade-talks-take-center-stage-shutdown-earnings.html
https://www.nasdaq.com/article/key-takeaways-from-q4-earnings-results-thus-far-cm1084343
https://www.reuters.com/article/us-usa-economy/u-s-consumer-sentiment-at-two-year-low-manufacturing-rebounds-idUSKCN1PC1NT
https://www.cnbc.com/2019/01/18/industrial-production-december-2018.html
https://www.reuters.com/article/us-usa-economy/u-s-consumer-sentiment-at-two-year-low-manufacturing-rebounds-idUSKCN1PC1NT
The Rally Continues2019-01-22T13:04:51-04:00

Key Takeaways of the SEP IRA

Key Takeaways of the SEP IRA

April 15th will be here in a blink of an eye. Are you self-employed or a small business owner? Check out our new SEP IRA infographic for a quick overview of the benefits, limits, and deadlines. http://bit.ly/Sep_IRA

Key Takeaways of the SEP IRA2019-01-17T10:23:11-04:00

Markets Relax and Rally

The Weekly Update

Week of January 14, 2019
By Christopher T. Much, CFP®, AIF®

After months of volatility, markets relaxed a bit last week. For the first time since October, the S&P 500 went 5 days without a 1% gain or loss. The Cboe Volatility Index, or VIX, also fell to lower than 20—in December, it spiked above 35.

For the week, the S&P 500 added 2.54%, the Dow gained 2.40%, and the NASDAQ increased 3.45%. All three indexes are in positive territory for 2019. International stocks in the MSCI EAFE grew as well, with a 2.85% weekly gain.

What drove last week’s gains?
Updates on trade and monetary policy contributed to investor decisions, yet again.

  1. The Federal Reserve made dovish comments.
    Last week, multiple Fed officials gave speeches indicating our central bank would carefully approach its interest rate decisions in 2019. Fed Chairman Jerome Powell described the policies as “flexible” and “patient.”
  2. A trade resolution seemed more likely.
    Many investors believe that efforts to resolve trade tension between the U.S. and China made progress last week. On Wednesday, January 9, talks concluded in Beijing after three days of negotiations, and China said the “in-depth” meetings made a resolution possible. The next day, U.S. Treasury Secretary Steve Mnuchin announced that a high-level Chinese policy advisor is coming to D.C. later this month for further talks.

What is ahead?
Last week’s trade and policy headlines seemed to ease some of the risks on investors’ minds. However, both challenges and opportunities remain.

This week marks the beginning of U.S. corporate earnings season. Analysts have low expectations for companies’ 4th-quarter performance, especially after a number of large corporations released warnings about their results. However, analysts still predict that S&P 500 companies experienced 14.5% profit growth. In addition, the generally sour, pessimistic mood surrounding earnings could support equities in two ways: 1) Investors may not react strongly if companies miss projections, and 2) any companies that have surprisingly good results could see stock price jumps.

Along with earnings results, investors will be paying close attention to companies’ commentary on business in China. Some experts believe Chinese economic growth is slowing, which is already affecting market performance. On Friday, markets stumbled a bit as analysts considered data and commentary on China’s economy. These details will remain important to watch—and see how it relates to trade.

In addition, while the U.S. federal government shutdown has not yet had a large market impact, if it continues for too long, it could sizably affect the economy.

We will continue to monitor these and other financial perspectives as we determine where the markets are—and what may be on the horizon. If you have any questions, we’re here to talk and listen.

ECONOMIC CALENDAR:
Tuesday: PPI-FD
Wednesday: Retail Sales, Housing Market Index
Thursday: Housing Starts, Jobless Claims
Friday: Industrial Production, Consumer Sentiment

Past performance is no guarantee of future results. Data collected from Investors FastTrack software.
https://www.cnbc.com/2019/01/11/stock-market-dow-under-pressure-as-investors-await-inflation-data.html
https://www.bloomberg.com/news/articles/2019-01-11/well-that-was-fast-so-are-the-bulls-back-in-charge-now?srnd=markets-vp
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.msci.com/end-of-day-data-search
https://www.reuters.com/article/us-usa-stocks/wall-streets-five-day-rally-flickers-out-as-earnings-near-idUSKCN1P51FS
https://www.marketwatch.com/story/stock-futures-edge-lower-ahead-of-inflation-data-2019-01-11
https://www.bloomberg.com/news/articles/2019-01-09/china-says-trade-talks-with-u-s-concluded-both-sides-serious
https://www.marketwatch.com/story/stock-futures-edge-lower-ahead-of-inflation-data-2019-01-11
https://www.reuters.com/article/us-global-markets/u-s-stocks-pause-after-five-day-rally-dollar-rebounds-idUSKCN1P503D
https://www.reuters.com/article/us-usa-stocks-weekahead/slashed-profit-expectations-may-set-stage-for-gains-idUSKCN1P525B
https://www.reuters.com/article/us-usa-stocks-weekahead/slashed-profit-expectations-may-set-stage-for-gains-idUSKCN1P525B
https://www.cnbc.com/2019/01/11/stock-market-dow-under-pressure-as-investors-await-inflation-data.html
https://www.marketwatch.com/story/stock-futures-edge-lower-ahead-of-inflation-data-2019-01-11
Markets Relax and Rally2019-01-14T12:14:18-04:00

Markets Up – And Volatile

The Weekly Update

Week of January, 7 2019
By Christopher T. Much, CFP®, AIF®

U.S. markets experienced more wild sessions last week before ending in positive territory as the recent turbulence continued. In fact, we are currently in the middle of some of the most volatile market performance in more than eight years. For the week, the S&P 500 gained 1.86%, the Dow added 1.61%, and the NASDAQ increased 2.34%. MSCI EAFE stocks also increased, posting a 1.42% weekly gain.

While the results may not seem especially dramatic, the path to get there certainly was. On Thursday, January 3, domestic stocks plunged, as factory data and a tech warning spooked investors. Then, the next day, the S&P 500, Dow, and NASDAQ each gained at least 3.3%. Friday’s performance marked one of the largest rallies since the beginning of this bull market.

What drove the market rally?

Two key events contributed to the huge jumps on Friday: 1) the latest labor report and 2) comments from the Federal Reserve Chairman.

1. December’s labor report exceeded projections.
Many people expected that the economy would add around 176,000 jobs last month. Instead, the latest data revealed that the increase was actually 312,000 new jobs in December—drastically beating expectations. Not only did last month’s labor report show more jobs added than anticipated, but wage growth and labor market participation also increased.

Why does this data matter?
Investors have been very concerned that economic growth is slowing. This data helped quell worries that a recession is ahead.

2. The Fed shared new policy perspectives.
Fed Chair Jerome Powell told the American Economic Association that the Federal Reserve understands the market’s worries and hasn’t predetermined its future interest rate hikes.

Why does this update matter?
Some of the uneasiness the markets have shown recently are a result of concerns that the Fed is tightening monetary policy too quickly. Powell’s comments indicate the Fed is sensitive to economic conditions, an update that many investors wanted to hear.

What is on the horizon?

A number of unresolved situations remain for the markets and economy. The government shutdown continues, and a solution doesn’t appear imminent at the moment. Trade dynamics are also still an important consideration, especially since corporations are now issuing warnings that trade is affecting their profits. Meanwhile, U.S. officials will be meeting with China this week to talk once again.

For now, the volatility we are experiencing may continue. Remember, we’re closely tracking developments to see how they may affect your financial life. If you have questions about how to weather these ups and downs, we are here for you.

ECONOMIC CALENDAR:
Monday: Factory Orders, ISM Non-Mfg. Index
Tuesday: JOLTS
Wednesday: FOMC Minutes
Thursday: Jobless Claims
Friday: CPI

Past performance is no guarantee of future results. Data collected from Investors FastTrack software.
https://www.bloomberg.com/news/articles/2019-01-04/all-the-days-are-big-days-for-stocks-as-bulls-bears-trade-blows?srnd=premium
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.msci.com/end-of-day-data-search
https://www.bloomberg.com/news/articles/2019-01-03/asia-stocks-to-track-u-s-losses-on-growth-worries-markets-wrap?srnd=markets-vp
https://www.cnbc.com/2019/01/04/stock-market-investors-react-to-us-china-trade-talks.html
https://www.bloomberg.com/news/articles/2019-01-03/asia-stocks-to-track-u-s-losses-on-growth-worries-markets-wrap?srnd=markets-vp
https://www.cnbc.com/2019/01/04/stock-market-investors-react-to-us-china-trade-talks.html
https://www.cnbc.com/2019/01/04/stock-market-investors-react-to-us-china-trade-talks.html
https://www.bloomberg.com/news/articles/2019-01-03/asia-stocks-to-track-u-s-losses-on-growth-worries-markets-wrap?srnd=markets-vp
https://www.bloomberg.com/news/articles/2019-01-03/asia-stocks-to-track-u-s-losses-on-growth-worries-markets-wrap?srnd=markets-vp
https://www.reuters.com/article/us-usa-stocks/wall-st-rebounds-on-robust-jobs-report-dovish-powell-remarks-idUSKCN1OY154
https://www.cnbc.com/2019/01/04/stock-market-investors-react-to-us-china-trade-talks.html
https://www.bloomberg.com/news/articles/2019-01-03/asia-stocks-to-track-u-s-losses-on-growth-worries-markets-wrap?srnd=markets-vp
https://www.reuters.com/article/us-usa-stocks/wall-st-rebounds-on-robust-jobs-report-dovish-powell-remarks-idUSKCN1OY154
Markets Up – And Volatile2019-01-08T10:05:49-04:00