Over the past week, the uncertainty surrounding President Trump’s policy-making has shifted to his ability to institute tax reform and establish infrastructure expenditures. While many investors expected a major sell-off on the fallout surrounding the failure of Trump’s healthcare bill in Congress, the markets unexpectedly closed the week on a positive note. The NASDAQ Composite was the clear outperformer, notching a 1.42% return while the Dow Jones Industrial Average and the S&P 500 returned 0.32% and 0.80%, respectively. The optimism also drew off the strong consumer confidence numbers and revised fourth quarter GDP data released last week. More specifically, consumer confidence came in at 125.4 in March, beating the expectations of 114.0 by a large margin. The revision was primarily due to increased consumer spending which makes up nearly two thirds of U.S. GDP.
While the U.S. markets shrugged off the healthcare bill results, Asian and European equities were volatile at the start of the week. In the UK, Prime Minister May invoked Article 50, initiating the Brexit talks last Wednesday with a hand-written letter delivered in person to European Union officials. The British pound edged lower in response and is expected to remain volatile throughout the Brexit discussions as it adjusts to an uncertain geopolitical landscape. Eurozone inflation data was also disappointing and short of expectations, causing the Euro to lose some ground. However, it justifies the European Central Bank’s (ECB) stance with its monetary policy and stimulus plan while simultaneously reinforcing the market’s expectations of lower rates for longer.
What are we reading?
Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links:
The Commerce Department released its final estimate of the 2016 fourth quarter GDP, revising it upwards to 2.1% from 1.9% earlier. The change was largely attributable to robust consumer spending partially offset by the largest gain in imports in two years. We would note that, despite the upward revision, the economy grew only 1.6% in 2016 as compared to 2.6% in 2015.
In March, U.S. consumer confidence surged to 125.4, a 16-year high, and handily beating consensus expectations on account of growing labor market optimism. The economy is showing signs of gaining momentum and consumers’ assessment of both current business and labor market conditions improved sharply in March.
The People’s Bank of China is likely to raise money market rates again while keeping benchmark rates unchanged. Chinese policymakers are clearly focused on risk management and appear willing to sacrifice growth over the short-term.
OPEC and non-OPEC members met last week, delaying an extension of the production cut and preferring to wait until its May meeting to provide further guidance. Despite this, oil prices regained some lost ground and pushed above $50 per barrel as Kuwait signaled that OPEC may indeed be considering an extension. We would note that many of the OPEC members have already voiced support for rolling over the agreement.
The Eurozone Consumer Price Index inflation declined to 1.5% for March from 2.0% in February and was well below market expectations of a 1.8% reading. The decline in core inflation could be significant for the region and will likely reinforce the ECB’s determination to not make any premature changes to their accommodative monetary policy. We expect a more dovish tone from ECB regulators over the short term.
Fun Story of the Week
If you were lucky enough to grow up in the 1930’s and 1940’s, you just might remember when chefs around America considered lobster a “garbage species.” Today, however, lobster is considered to be one of the most luxurious menu items in the country. A culinary reversal such as the one seen in the lobster industry can shift markets and open new opportunities for entrepreneurs looking for the next hot item. Mohammed Ashour, CEO of Aspire Food Group, believes he identified the subject of America’s next craving. Believe it or not, Ashour sees crickets as the next big food industry in the United States. Aspire Foods now manufactures five different flavors of whole crickets, including Texas BBQ, sea salt and vinegar and sour cream and onion. When these crunchy little critters make it to your grocery store, will you be up to the challenge?
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of CWM, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
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S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.