Weekly Market Commentary October 16, 2017

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Stocks moved higher last week, and many stock indices continued to hit new highs. The S&P 500 rose 0.2%. Global stocks did even better as the MSCI ACWI rose 0.9%. The Bloomberg BarCap US Aggregate Bond Index climbed 0.5%.

Most news during the week was positive. The economic aftereffects of hurricane season pushed inflation higher in September, but inflation pressures dissipate when food and energy prices are removed from the equation. The IMF’s increased estimates for economic growth also supported markets.

Key points for the week

  • Excluding food and energy, consumer prices are up 1.7% for the last 12 months, which includes an increase of 0.1% last month.
  • Wages for full-time workers and household incomes are increasing rapidly.
  • The International Monetary Fund (IMF) raised its growth expectations by 0.1% for 2017 and 2018.

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.

US Consumer Price Index rose 0.5% in Sept and US producer prices increase as Harvey boosts gasoline prices

The Consumer Price Index (CPI) recorded a 0.5% increase while the Producer Price Index (PPI) increased by 0.4%. These hikes have pushed the CPI’s year-on-year gain to 2.2% and the PPI’s to 2.6%. The PPI gain is the largest since 2012. However, gasoline prices, which rose by 13.1%, accounted for 75% and 66% of the increases in the CPI and PPI respectively. Underlying inflation remains relatively low. The underlying CPI only increased by 0.1%, and the underlying PPI rose 0.2%.

Global Economic Upswing Creates a Window of Opportunity

Global recovery is continuing at a faster pace. The World Economic Outlook revised its projections for global growth to 3.6% this year and 3.7% for next year. This upgrade is due to brighter prospects in the current term and emerging markets and developing economies playing a bigger role in 2018. This is well above the 2016 growth rate of 3.2%, which was the lowest since the 2008 financial crisis.

Outlook on the United States

Real median household income increased by 3.2% in 2016, the second greatest gain since 1998. This increase was seen across all household groups regardless of age, income, race, education, and region. The current trends in employment and wages suggest income growth is continuing in 2017. This is a positive signal for the economy and consumption.


Fun Story of the Week

Missing wallet returned 20 years later

An alumnus from Taylor University in Indiana was reunited with his wallet recently after a couple students dug it up from the ground. The students were biking around the softball field when they noticed an object lodged in the earth — a leather wallet. It was in pretty good shape, so they assumed it had been dropped recently. But then they checked the credit card. It expired in 1995. After trying out the student ID card, the students looked up the owner’s information and messaged him on Instagram. He was surprised but happy to have it back. He paid the students $20 — enough to cover shipping and a little extra for their trouble.


 

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