Weekly Market Commentary September 18, 2017

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Relief over hurricane Irma and renewed confidence in the economy pushed some stock indexes to new highs during the week. The S&P 500 soared 1.6% and the MSCI ACWI increased 1.2%. Both indexes hit new highs.The Bloomberg BarCap U.S. Aggregate Bond Index declined 0.5% on increasing risk that the central bank will raise rates one more time this year.

Hurricane Irma being less destructive than expected provided a big boost to markets. Inflation came in above expectations. Increased inflation and a reassessment of expected Fed policy pressured bonds and helped the performance of the more economically sensitive areas of the U.S. market.

Key bullet points for the week

  • A number of indices hit new highs in a week where asset classes that have lagged this year recovered some ground on asset classes that have outperformed
  • Inflation came in above expectations and other economic data points were reasonably strong – pushing bonds lower
  • Expectations for a December interest rate hike shot higher on the news and are back above 50%
  • U.S. Investor Optimism is at a 20-year High

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:

Fed Officials Admit they’ve lost some Credibility on Inflation

Fed officials have begun to acknowledge that their ability to control inflation expectations has waned since the financial crisis. The Fed’s ability to control inflation expectations in the broader economy helps the economy to avoid temporary bouts of deflation becoming permanent.

Chinese Crackdown on Bitcoin Exchange

The cryptocurrency Bitcoin saw its price fall sharply after China announced it was shutting down a Bitcoin exchange. China is a big market for Bitcoin, as some Chinese use it to move cash out of China. In addition to restricting the accessibility of Bitcoin, China announced that it was liberalizing some of its rules for taking money out of the country. That action reduced expected demand for Bitcoin and pushed the price lower as well.

Investor Optimism Rises to Levels last seen in Technology Bubble

Signs of investor complacency continue to grow. The Wells Fargo/Gallup survey of investor optimism hit its highest levels since September 2000. The sharp increase over the last 18 months is the largest in the index’s history, outside of when investor attitudes rally after the end of a sharp market decline. Sixty-eight percent of investors believe now is a good time to invest. As we have noted in the past, any correction may spook investors into selling during the downturn, providing additional pressure to the downside.

Fun Story of the Week (You write the last sentence version)

Court to Rule on Donkey Biting the Rear of a Car

Who is liable if a donkey bites an orange car because he thought it was a carrot? In Germany, a man parked his orange McLaren sports car too close to the donkey who was grazing nearby. The donkey decided it would be a good idea to take a bite out of the rear bumper, causing €30K damage. Now courts must decide who will pay for the damages not covered by the garage where the car was parked. The owner of the donkey blames the driver for parking too close to the donkey, while the car owner wants the donkey’s owner to pay up. [A number of puns could be included at this point, but none we came up with were fit for publishing. We invite our readers to come up with their own.]




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Market Commentary: S&P 500 Rallies 6.5%, Lifting Market Above Bear Level

The S&P 500 spent only a short time below the 20%-decline threshold, before jumping back above it last week. U.S. large-cap stocks rallied 6.5% based on optimism that inflationary pressures are starting to respond to higher interest rates.

Market Commentary: Fed Raises Rates by 0.75%, Market Moves Into Bear Territory

The S&P 500 dropped 5.7% last week and is now 22.3% off its peak. This decline pushed the index of large-cap U.S. stocks into a bear market, which is defined as a 20% or greater drop from its peak. Volatility remained elevated, and the S&P 500 has now moved by 1% or more 60 times …

Special Market Commentary: S&P 500 Slips Into a Bear Market. Now What?

Fueled by inflation readings that have remained stubbornly elevated, the stock market, measured as the S&P 500 Index, entered bear market territory at market close on June 13, 2022.  A bear market represents a decline in equity values by more than 20%.

Market Commentary: Inflation Pressures Remain High, S&P Dips Again

The S&P 500 dropped 5.1% last week as investors digested new inflation data released on Friday. May’s Consumer Price Index (CPI) report showed a reacceleration of inflation after a brief reprieve in April. Headline CPI increased 8.6%, which is the fastest pace since December 1981. The p …
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