Markets rebounded last week, posting sizable gains and moving back into positive territory for the year. All three domestic indexes experienced their largest weekly growth in years, despite losing some ground on Friday after news of additional indictments in the Russia investigation.[1]

By markets' close on February 16, the S&P 500 added 4.30%; the Dow was up 4.25%; and the NASDAQ increased 5.31%.[2] International stocks in the MSCI EAFE also gained 4.18% for the week.[3] 

This performance, however, did not come from simple, straightforward increases. Instead, the volatility from recent weeks continued. In fact, the S&P 500 has lost or gained at least 1% on 8 of the past 10 trading days. The index only experienced that level of movement eight times throughout 2017.[4]

Key Economic Findings

We received a wealth of data last week, and the readings helped deepen our understanding of the economy. The reports showed some mixed results, but much of the information continues to indicate that the economy is on solid ground.[5]

January Highlights

  • Housing starts jumped 9.7%, beating expectations and reaching the 2nd-fastest rate since the recession. Even with mortgage rates increasing and tax reform affecting some buyers' mortgage interest deductions, the data shows positive news for future homebuilding as well.
  • Consumer price index increased 0.5%, rising 2.1% in the past year. This reading indicates that prices are continuing to rise faster than the Federal Reserve's target rate.[6] 
     
  • Retail sales fell, dropping 0.3% in part due to slow motor vehicle sales. In addition, negative updates to December's readings could affect 4th-quarter Gross Domestic Product results.[7] 

February Highlights

  • Consumer sentiment beat expectations, coming in at 99.9, its 2nd-highest reading in 14 years. The movement came as tax-cut optimism outweighed stock-market concerns.[8]  

The Takeaway

Many reports show that the economy is strong, so watching for inflation will remain important as the markets keep moving. The combination of growing inflation and a strong labor market means the Fed is still likely to hike rates three times this year, with a fourth increase very possible.[9]

Looking ahead, volatility may continue, so keep this on your radar. Investors caught between conflicting concerns about missing the bull market and losing money may contribute to ongoing uncertainty.[10] Remember, stock fluctuations are normal. We are here to help you understand what's happening in the markets and how to position yourself for the financial life you desire. 

ECONOMIC CALENDAR

Monday: U.S. Markets Closed for Presidents' Day
Wednesday: Existing Home Sales
Thursday: Jobless Claims


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 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.

Gross Domestic Product (GDP) is a measure of output from U.S. factories and related consumption in the U.S.  It does not include products made by U.S. companies in foreign markets.

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.

A recession is a significant decline in activity across the economy, lasting longer than a few months.  The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.

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 Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither 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.

[1] www.cnbc.com/2018/02/16/us-stocks-strong-week-volatility-rates.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=%21DJI®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

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

[4] www.cnbc.com/2018/02/16/us-stocks-strong-week-volatility-rates.html

[5] www.ftportfolios.com/Commentary/EconomicResearch/2018/2/16/housing-starts-increased-9.7percent-in-january

[6] www.marketwatch.com/story/cpi-surges-05-in-january-but-yearly-rate-of-inflation-unchanged-2018-02-14

[7] wsj-us.econoday.com/byshoweventfull.asp?fid=485748&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[8] wsj-us.econoday.com/byshoweventfull.asp?fid=485844&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[9] www.ftportfolios.com/blogs/EconBlog/2018/2/14/the-consumer-price-index-rose-0.5percent-in-january

[10] www.cnbc.com/2018/02/16/us-stocks-strong-week-volatility-rates.html