Once again, the markets ended the week in positive territory: and all three 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 2nd, 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.
- Tuesday: JOLTS
- Wednesday: EIA Petroleum Status Report
- Thursday: Jobless Claims
- Friday: Consumer Sentiment
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Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
The Federal Reserve System (also known as the Federal Reserve and, informally, as the Fed) is the central banking system of the United States. The Federal Reserve System is composed of 12 regional Reserve banks which supervise state member banks. The Federal Reserve System controls the Federal Funds Rate (aka Fed Funds Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.
The Institute of Supply Management (ISM) Non-manufacturing Index tracks economic data based on surveys of more than 400 non-manufacturing firms' purchasing and supply executives within 60 sectors across the nation.
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Past performance does not guarantee future results.
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