Economic Update 1-09-2017
- In the first week of the year, a variety of economic data releases pointed to continued expansion, including the ISM manufacturing and non-manufacturing indexes. The employment situation report for December, however, was decent but didn’t meet expectations.
- Equity markets in the U.S. and abroad gained in the first week of the year. Bonds also rose to a lesser degree as interest rates declined. Commodities were mixed, with oil rising slightly for the week.
U.S. stocks generally rose on the week with continued optimism about 2017’s prospects and decent economic data to begin the year. The Dow Jones Industrial Average again just missed the 20,000 mark, by only a half-point by Friday. By sector, healthcare and technology led with returns well over 2%, while telecom and utilities lagged.
Foreign equities outperformed domestics, led by Japan and emerging markets, while the U.K. and Europe ended up similar to U.S. markets. While no major news emerged during the week, sentiment continues to revolve around the pace of growth. In both Europe and Japan, expectations are low, and volatility could be a factor in the former as several key elections are on the calendar early this year. On the other hand, based on historical tendencies, results that simply beat tempered expectations could be enough to spark more positive results. Emerging market results were broad-based, with positive returns coming from Latin America, Eastern Europe and Asia.
U.S. bonds fared positively on the first week of the year, with interest rates again ticking down somewhat off of highs reached during the last several weeks. The bulk of investment-grade debt gained ground for the week, with longer duration as well as high yield corporates leading the way with the strongest gains. Emerging market bonds also gained, while major developed market bonds lagged as rates rose as inflation results in Europe came in higher than expected, at 1.1%, which is the fastest pace in about three years.
Real estate gained several percent in the U.S. and Asia, in keeping with broader equities, while developed European returns were positive to a lesser degree.
Commodity indexes were mixed on the week, with energy down (mostly due to a drop in volatile natural gas), industrial and precious metals higher, as were several futures in the softs category, like sugar and coffee. Despite beginning the week with a decline of about a dollar, West Texas Crude ended the week up +0.5% to just a shade under $54/barrel.
|Period ending 1/6/2017||1 Week (%)||YTD (%)|
|BarCap U.S. Aggregate||0.17||0.17|
|U.S. Treasury Yields||3 Mo.||2 Yr.||5 Yr.||10 Yr.||30 Yr.|
Sources: LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.