First Week of the New Year Performance

Last week was the strongest start to the stock market in over a decade (since 2006).  The question on everyone’s mind:  Can it last?
 
Well, the markets may be slightly ahead of themselves in the very short term (meaning we could see some traders flipping a few positions here and there), but there’s a lot of earnings season left — and a lot of speculation the new tax plan will improve profit margins.  This optimism may continue for a bit yet.
 
Given how strong the markets opened, don’t be surprised if we have increased volatility this week.  Because of the radical (and yet unknown) changes to the tax code, markets are still sorting out which data is valid and which data is a distraction.
 
A variety of factors affected the markets last week—from tax reform to commodity prices.  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. 
 
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. 
 
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.  If the Fed continues with its gradual rate increases, this move could have a favorable affect on stocks. 
 
For the week, expect the volatility to continue. The key to watch is simply whether or not the market hangs on to last week’s gains or re-traces.  If the markets managed to fall below the yearly opening price, this will shake the confidence of a lot of investors.  As long as this week remains in the ‘generally sideways’ range, things will probably stabilize and move higher from here.
 
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.
 
Quote of the week:
"The only person you’re destined to become
is the person you decide to be."
Ralph Waldo Emerson