Weekly Market Insight - Strong Markets for the Holidays

Strong Markets for the Holidays

As the holiday season progresses, the markets continue to impress. Last week, many energy, financial, and industrial sector stocks helped drive performance.[i] Hitting record highs yet again, the S&P gained 0.35%, and the Dow jumped 0.40% for the week.[ii] Meanwhile, the NASDAQ fell slightly by 0.11%, and the MSCI EAFE rose 0.08%.[iii]

Solid labor market conditions and a rebounding retail climate are helping to support the economy as the year closes.[iv] Here are some developments that stood out last week:

Promising Labor Market Numbers

Encouraging news came on Friday when we learned that nonfarm payroll jobs rose more than expected in November, coming in at 228,000.[v] Manufacturers have created almost 200,000 new jobs in the last 12 months and 1 million new factory jobs since 2010.[vi] We have now had 86-straight months of job gains, the longest stretch in U.S. history.[vii]

This growth in new jobs has helped to keep unemployment down, which remains at a 17-year low of 4.1%.[viii] Additionally, average hourly wages have increased by 2.5% for the year.[ix]

Retail Climate in Positive Territory

As the job market expands and people have more spending power, we’re experiencing a robust retail climate. Retail stocks are rebounding after a long market lag, and holiday shopping is strong this season with predicted growth from 3.6% to 4% over last year. Further, brick-and-mortar shops are even feeling the shopping strength, emerging as some of the best performing retail investments, despite their general drop in 2017.[x]

What Lies Ahead

Now that Congress has avoided a government shutdown—at least for a few weeks—the Senate and the House can focus on the tax bill.[xi] While progress has been made, they still need to negotiate the financial bill’s terms.[xii]

Next week, investors will follow the Fed to see if it raises interest rates, as expected. In addition, the Fed could also comment on inflation expectations and address concerns about potential asset bubbles.[xiii]

As the holidays wind up, we will continue to monitor the markets and focus on the fundamentals. If you have questions about how this news affects your financial life, we’re here to talk. Feel free to contact us and find the answers you need.

ECONOMIC CALENDAR

Monday: JOLTS

Wednesday: Consumer Price Index, FOMC Meeting Announcement
Thursday: Jobless Claims, Retail Sales, Business Inventories

Friday: Empire State Mfg Survey, Industrial Production

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] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=486628&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

https://www.cnbc.com/2017/12/05/questions-rising-about-limits-of-the-tax-trade.html

[ii] https://www.cnbc.com/2017/12/08/us-stocks-jobs-report-brexit-tax-reform.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

[iii] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

https://www.msci.com/end-of-day-data-search

[iv] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=486628&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[v] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477426&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

http://wsj-us.econoday.com/byshoweventarticle.asp?fid=486628&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[vi] https://www.marketwatch.com/story/american-manufacturers-flex-their-muscles-sales-hiring-production-all-on-upswing-2017-12-08

[vii] http://www.foxbusiness.com/markets/2017/12/08/us-economy-adds-more-jobs-in-november-than-expected.html