After briefly stumbling the week of September 4, domestic indexes notched significant gains last week and hit record highs. By Friday, the S&P 500 exceeded 2,500 for the first time; the Dow closed at its highest level ever; and the NASDAQ reached an intraday record.[1] Each of the indexes gained well over 1% for the week, with the S&P 500 adding 1.58%, the Dow jumping 2.16%, and the NASDAQ increasing 1.39%.[2] International stocks in the MSCI EAFE also performed well, with a weekly gain of 0.55%.[3]

When looking at these sizable increases, you might expect that positive data and geopolitical calm filled the news last week. Instead, we experienced a number of occurrences that could have derailed stock performance: 

  • North Korea tested another missile
  • London experienced a terrorist attack[4]
  • Industrial production declined in August
  • Retail sales fell in August[5]

So, why did stocks rise despite these less-than-stellar updates?

Of course, it goes without saying that the markets are incredibly complex. You can rarely, if ever, point to a single reason for their performance. Still, a few details may help put this week's seemingly incongruous gains into perspective.

1. Investors mostly ignored North Korea and the London bombing. 

Rather than running to less volatile investments after both geopolitical events, typical havens actually declined. After over a dozen North Korean missile tests and multiple London terror attacks this year, investors may simply be feeling complacent about these occurrences. Instead, many are looking to the Fed's meeting this week as a market catalyst.[6]  

2. Weather affected industrial production and retail sales. 

Hurricane Harvey likely pushed down both industrial production and retail sales in August, meaning these data-declines may be temporary. In addition, mild weather on the East Coast meant less air conditioner use, decreasing utility output for industrial production.[7] 

3. The Consumer Price Index (CPI) jumped. 

After missing expectations for five months in a row, the CPI - a measure of inflation - beat estimates for August. If upcoming months continue this positive performance, which the hurricanes make more likely, the Federal Reserve may be more likely to raise interest rates in December.[8] 

What is on the horizon?

Hurricanes Harvey and Irma could continue to affect economic data in the fourth quarter by driving down retail sales and increasing the Consumer Price Index. We may need to wait a few months before we can see the true trends underlying the data.[9] For now, we will continue to track market performance and investor sentiment, and seek out accurate information amidst the hype. 

In the meantime, we also want to help ensure you have the information you need to address another critical topic in the financial world: protecting your identity. With Equifax announcing that its data breach may have affected 143 million customers' most important personal information, many Americans need to take steps to secure their accounts.[10] To get full details on the breach and its potential impact to you go to www.equifax.com/personal. If you have questions about what steps to take next, and how to help prevent identity theft. please contact us. 

ECONOMIC CALENDAR

  • Monday: Housing Market Index
  • Tuesday: Housing Starts
  • Wednesday: Existing Home Sales, FOMC Meeting Announcement
  • Friday: PMI Composite Flash

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

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.

Inflation is the rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market. 

Consumer Price Index (CPI) measures prices of a fixed basket of goods bought by a typical consumer, widely used as a cost-of-living benchmark, and uses January 1982 as the base year.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

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[1] https://www.cnbc.com/2017/09/15/us-stocks-weekly-gains-fed-retail.html

[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

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

[4] https://www.bloomberg.com/news/articles/2017-09-14/yen-jumps-after-report-of-north-korea-missile-markets-wrap 

[5] https://www.cnbc.com/2017/09/15/us-stocks-weekly-gains-fed-retail.html

[6] https://www.bloomberg.com/news/articles/2017-09-14/yen-jumps-after-report-of-north-korea-missile-markets-wrap
http://www.reuters.com/article/us-usa-stocks/wall-street-hits-record-highs-sp-500-pierces-2500-idUSKCN1BQ1HK

[7] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/9/15/industrial-production-declined-0.9percent-in-august
http://www.ftportfolios.com/Commentary/EconomicResearch/2017/9/15/retail-sales-declined-0.2percent-in-august 

[8] https://www.bloomberg.com/news/articles/2017-09-14/u-s-inflation-picks-up-ending-five-month-streak-of-misses

[9] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/9/15/retail-sales-declined-0.2percent-in-august
http://www.ftportfolios.com/Commentary/EconomicResearch/2017/9/14/the-consumer-price-index-rose-0.4percent-in-august

[10] http://www.chicagotribune.com/business/ct-equifax-data-breach-0917-biz-20170915-story.html