Weekly Market Insight – Stocks Start 2018 With a Jump
The first week of 2018 is behind us, and across the globe, stocks experienced a strong start to the year. International stocks in the MSCI EAFE gained 2.44% last week.[i] In the U.S., our major indexes also leapt forward, hitting a number of records and milestones.[ii]
Domestic Index Performance for the First Week of 2018[iii]
S&P 500:
- Gained 2.60%
- Hit 2,700 for the first time
- Posted its largest weekly gain since December 2016
Dow:
- Gained 2.33%
- Hit 25,000 for the first time
- Had its best yearly start since 2006
NASDAQ:
- Gained 3.38%
- Hit 7,000 for the first time
- Posted its largest weekly gain since December 2016
- Had its best yearly start since 2006
What drove markets last week?
A variety of factors affected the markets last week—from tax reform to commodity prices.[iv] Interestingly, considering the indexes’ positive performance, one of the biggest economic headlines seemed to provide negative data: The U.S. economy added fewer jobs than anticipated.[v]
On the surface, this report may seem like bad news for the economy. The missed projection, however, is likely less of a big deal than it appears at first. While hiring was lower than expected, wages picked up and the unemployment rate remained at 4.1%—the lowest rate since 2000.[vi]
Ultimately, this jobs report may be positive news for the markets. It shows that the economy is still adding jobs but not at a blistering pace. As a result, slower job growth could keep the Federal Reserve from raising interest rates too aggressively. Cleveland Fed President Loretta Mester said she believes, “We’re basically at maximum employment from the view of monetary policy.” She anticipates 3 to 4 rate increases this year.[vii] If the Fed continues with its gradual rate increases, this move could have a favorable affect on stocks.[viii]
As we move forward in 2018, we will continue monitoring a myriad of economic perspectives that may impact you, including any changes to monetary policy. For now, we are pleased to see the markets’ positive start to the year and look forward to guiding you through whatever lies ahead.
ECONOMIC CALENDAR
Tuesday: JOLTS
Thursday: Jobless Claims
Friday: Consumer Price Index, Retail Sales
Click image to enlarge
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
[i] https://www.msci.com/end-of-day-data-search
[ii] https://www.bloomberg.com/news/articles/2018-01-04/asia-stocks-poised-to-extend-torrid-start-to-2018-markets-wrap
[iii] https://www.cnbc.com/2018/01/05/us-stock-futures-us-jobs-dow-politics-on-the-agenda.html
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
[iv] https://www.marketwatch.com/story/sp-eyes-another-historic-record-run-with-us-jobs-data-on-deck-2018-01-05
[v] https://www.bloomberg.com/news/articles/2018-01-04/asia-stocks-poised-to-extend-torrid-start-to-2018-markets-wrap
[vi] https://www.bloomberg.com/news/articles/2018-01-05/u-s-adds-148-000-jobs-wages-rise-in-signs-of-full-employment
[vii] https://www.marketwatch.com/story/sp-eyes-another-historic-record-run-with-us-jobs-data-on-deck-2018-01-05
[viii] https://finance.yahoo.com/news/futures-trim-gains-december-jobs-134147154.html
