Weekly Update – November 6, 2017
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. International stocks in the MSCI EAFE joined in the growth, posting a 0.90% increase.
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. The markets responded positively to the bill, in part because of the level of detail it included.
Key Takeaway: This tax reform could be significant, but it must pass through several steps ahead before becoming law.
2. 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.
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.
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.
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.
Wednesday: EIA Petroleum Status Report
Thursday: Jobless Claims
Friday: Consumer Sentiment
DATA AS OF 11/3/2017 1 WEEK SINCE 1/1/17 1 YEAR 5 YEAR 10 YEAR
STANDARD & POOR’S 500 0.26% 15.59% 23.90% 12.85% 5.54%
DOW 0.45% 19.11% 31.28% 12.45% 5.64%
NASDAQ 0.94% 25.66% 33.73% 17.80% 9.18%
INTERNATIONAL 0.90% 19.27% 21.54% 5.58% -1.54%
DATA AS OF 11/3/2017 1 MONTH 6 MONTH 1 YEAR 5 YEAR 10 YEAR
TREASURY YIELDS (CMT) 1.02% 1.31% 1.49% 1.99% 2.34%
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.