The Dow’s New Record – Weekly Update for January 30, 2017

After a brief pause during inauguration week, stocks continued to climb last week. The S&P 500 added 1.03%, the NASDAQ was up 1.90%, and the MSCI EAFE increased by 1.29%. The Dow also grew, adding 1.34%, ending the week above while hitting 20,000 for the first time ever.

Consumer confidence matched this positive performance, as the University of Michigan Consumer Sentiment measurement beat expectations in January and reached the highest levels since 2004. However, one piece of data we received last week gave a less rosy view of the economy: initial gross domestic product (GDP) reports.

What Happened: GDP Missed Projections

On Friday, we received the first report on real GDP for the fourth quarter of 2016. Growth declined significantly to come in at 1.9%—down from the third quarter’s reading of 3.5%.

Looking Deeper

Many aspects of our economy showed solid growth in the fourth quarter. Household purchases grew, business-equipment spending advanced for the first time in over a year, and inventory accumulation increased. Net exports, however, pulled growth down by 1.7%—the biggest drag since 2010—as we saw a jump in imports coupled with a decline in exports. Working to increase U.S. exports is important because it can help strengthen America’s economy, support additional jobs, and promote sustainable growth.

Without net exports pulling down economic expansion, fourth-quarter GDP could have been even higher than in the third quarter. Trade is integral to our economy, and changes in the balance between imports and exports measurably effect growth. The new administration’s potential plans to tax Mexican imports, change trade relationships with China, and restrict visitors from certain countries could affect our imports and exports—and thus our economy.

Between lagging GDP and the Dow reaching historic levels, this week showed us a range of perspectives on where the economy now stands. The markets will always have uncertainty and unanswered questions, and—as always—we must stay focused on the fundamentals that drive performance in the long term. For now, we will continue monitoring policy developments and the trade deficit to determine how they may impact economic growth in 2017 and beyond. We will also pay close attention to the economic data upon which we build our strategies for pursuing your goals.

ECONOMIC CALENDAR:

Monday: Personal Income and Outlays

Tuesday: Consumer Confidence

Wednesday: ADP Employment Report, ISM Manufacturing Index, FOMC Meeting Announcement

Thursday: Productivity and Costs

Friday: Employment Situation, Factory Orders, ISM Non-Manufacturing Index

December Earnings & a Presidential Week – Weekly Update for January 17, 2017

2017-01-09 Blog ImageAs we look back on markets last week, we see mixed results with none of the major domestic indexes gaining or losing more than 1%. The S&P 500 was down 0.10% for the week, and the Dow gave back 0.39%, yet again failing to reach 20,000. On the other hand, the NASDAQ increased by 0.96% and reached its sixth record close in 2017 on Friday—pushed by a 1.36% rally for Facebook after Raymond James upgraded its stock. International stocks in the MSCI EAFE added 0.82%.

What We Saw Last Week

Big banks reported earnings. Earnings season is upon us. On Friday, we saw JPMorgan Chase, Bank of America, and PNC Financial beat profit expectations. These positive results add some weight to the post-election financials rally, where financial-sector equities in the S&P 500 have added 17% since the election. A number of other banks will report this week, and we will look to see if their performance also matches the growth we have seen so far.

Retail sales grew. The December monthly retail sales report showed a 0.6% increase, slightly below the 0.7% consensus expectations. With this growth, retail sales are now up 4.1% in the past year. However, not all retailers are performing well. General merchandise stores are suffering as consumers continue to shop online and move away from in-person retail stores. We see the results of this trend in declining retails sales numbers and large companies announcing store closures, including Macy’s, Sears, CVS, and many more.

Consumer sentiment was high but divided. The University of Michigan’s monthly report on consumer sentiment was 98.1, just below predictions but still near highs we have not seen since 2004. One interesting finding in the report is a strong partisan divide in consumer confidence. Richard Curtin, director of the consumer survey, described “extreme differences” between people’s expectations for whether new political policies would help or hurt the economy. He reminded people that the most impact on consumer sentiment will come from “actual changes in the economy” as a result of Trump’s work, which we will have to wait a few months to see.

What We’re Looking at in the Week Ahead

Earnings season continues. The markets will be watching earnings closely during this four-day trading week—specifically to see if other major financial institutions also beat expectations. Some analysts believe that to keep the current market rally going and demonstrate that there is weight behind the post-election growth, we’ll need to see excellent reports from most companies.

A number of high-profile companies report this week, including:

  • Morgan Stanley
  • Goldman Sachs
  • Citigroup
  • American Express
  • Netflix
  • IBM
  • UnitedHealth Group
  • General Electric Co.

Donald Trump becomes President. While earnings reports will be important to track, another event looms larger in many people’s minds: Donald Trump’s inauguration. After he takes the oath of office Friday morning and becomes President of the United States, we will begin to see how the market’s expectations for Trump’s policies match reality.

From trade to taxes to infrastructure and beyond, the next few months will give us a number of insights into how U.S. policies may change. Uncertainty remains, and we will watch for political developments that may affect the markets. In addition, we will continue to focus on the fundamentals that provide deep insight into how the economy is performing—and how we can strive to keep you on track toward your goals.

ECONOMIC CALENDAR:

Monday: U.S. Markets Closed in Observance of Martin Luther King, Jr. Day
Wednesday: Consumer Price Index, Industrial Production, Housing Market Index
Thursday: Housing Starts

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January 2017 Monthly Market Update Video

Happy New Year! We hope that you had a wonderful holiday season, and feel ready to take on the new year.

In this month’s video, we’ll discuss some of the major headlines that influenced markets in December — and provide insight in  to what these developments could mean for you as an investor.

If you have any questions or concerns after watching this video, send us an email, or give us a call at 419-425-2400. We would love to talk with you.

New Year Special Update: 2016 in Review – Weekly Update for January 3, 2017

2017-01-03-blog-imageFirst things first: Happy New Year! We’re thankful for all of you keeping up with us in 2016 and looking forward to what this next year holds. We appreciate your time and thoughts throughout the past year, and we are excited to work together to accomplish your financial goals in 2017.

Looking back on the final trading week of a very eventful year, we saw low volume and a break from the recent rallies for domestic indexes. While international stocks in the MSCI EAFE added 0.56%, all major U.S. indexes declined. The S&P 500 lost 1.10%, the Dow was down 0.86%, and the NASDAQ gave back 1.46%. For the first time since November 4, the indexes posted three straight days of losses. Despite these last-minute decreases, 2016 ended very differently than it began.

Last January, domestic indexes rang in the New Year with quite unpleasant performances. While the S&P 500 and NASDAQ dropped, the Dow experienced its worst-ever five-day start to a year, losing 1079 points on fears of an economic slowdown in China and plummeting oil prices.

By market close on December 30, 2016, all three indexes showed healthy growth for the year:

  • S&P 500: Up 9.5%
  • Dow: Up 13.4%
  • NASDAQ: Up 7.5%

In addition to this equity growth, last week showed us a number of encouraging economic indicators for 2016, including:

Consumer Confidence Surge: On December 27, Consumer Confidence beat expectations to reach 113.7 — a 13-year high. This metric indicates that consumers feel more positively about jobs, personal finances, business conditions, and more.

U.S. Dollar Increase: The dollar was up for the fourth straight year, showing a 3.7% increase for 2016 after hitting a 14-year high on December 20.

Crude Oil Recovery: After a rough start to the year, oil experienced its largest annual increase since 2009. In fact, three-dozen U.S. gas and oil producers in the S&P energy index gained more than 40% during 2016.

We all know that 2016 brought its fair share of surprises — from victories for Brexit and Donald Trump, to our recent stock market rally and beyond. However, the year ended with domestic indexes up and a number of positive economic indicators. As we look toward our future in 2017, we see opportunities for continued growth, as well as many questions that no one can yet answer.

  • Will President Trump reduce regulation and taxes?
  • Will OPEC keep its pledge to lower oil output?
  • How will China’s economy perform?
  • Could more “Brexits” be on the horizon?

The questions remain, but no matter the answers, we are here to help guide you through the year—and toward your goals—with proactive, strategic support. If you want to talk about what we experienced in 2016, or what we anticipate for the year ahead, we would love to get in touch with you. Please reach out to us at hello@hzcapital.com or give us a call at 419-425-2400.

ECONOMIC CALENDAR:

Monday: Markets Closed in Observance of New Year’s Day
Tuesday: PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending
Wednesday: ADP Employment Report
Thursday: PMI Services Index, ISM Non-Manufacturing Index
Friday: Employment Situation, International Trade, Factory Orders

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November 2014 Monthly Video Update