Markets up again...new data on the horizon
Once again, domestic markets reached record highs last week. The S&P 500 was up by 0.69% and the NASDAQ increased by 0.12%.[i] With its 0.96% week-over-week growth, the Dow has posted gains for 11 straight days and is currently experiencing its longest record streak since 1987.[ii] On the other hand, international equities in the MSCI EAFE lost ground, dropping by 0.25% for the week.[iii]
Last week did not offer much new information on economic fundamentals. With the
exception of January increases for new single-family homes and the fastest pace of
existing home sales since 2007, I do not have a tremendous amount of new data to share.[iv]
In the absence of this data, focusing on the roiling political conversations becomes much easier. As I have said before, I encourage you to pay attention to how the economy is performing—not what the headlines are blaring. Rather than recount the policy debates and political back-and-forth, let’s look at three important economic developments on our horizon: revised GDP, February CPI, and Fed interest rate deliberations.
February 28: Revised Q4 2016 GDP
On Tuesday, we will receive the second growth estimate of the U.S. economy during the fourth quarter of 2016, which came in at 1.9% in the first estimate.[v] Consensus is that the revised estimate will increase to 2.1%, but we will have to wait until March 30 to see the third and final measurement of Q4 economic growth.[vi]
The Bottom Line: GDP is key in measuring the U.S. economy’s strength. Any upward revisions would signal our economy is growing faster than the initial readings indicated.
March 15: February Consumer Price Index (CPI)
In January, the CPI experienced its largest month-over-month jump since 2013.[vii] The upcoming February report will help to show whether prices are continuing to increase and how the cost of living is changing.
The Bottom Line: The CPI measures changes to the average cost of specific goods and services that consumers purchase and is a key indicator for inflation.[viii] This data
affects the bond and equity markets, labor contracts, Social Security payments, tax brackets, and more.[ix]
March 15: Federal Open Market Committee (FOMC) Meeting Announcement
From March 14 – 15, the FOMC will meet and determine whether or not to raise the Federal Reserve’s benchmark interest rates.[x] After the meeting concludes, Fed Chair Janet Yellen will announce their decision—a move that market participants will watch very closely. Yellen recently commented that “Waiting too long to [raise rates] would be unwise.”[xi] However, Wall Street does not expect an increase in March and shows a less than 1 in 5 chance of this move.[xii]
The Bottom Line: When the Fed changes its benchmark interest rate, the effects reverberate throughout our economy. According to Barron’s, the FOMC interest-rate policy meetings “are the single most influential event for the markets.”[xiii] If the Fed decides to raise rates, this choice would affect interest rates now and also imply that monetary policy will continue to tighten throughout 2017.[xiv]
These upcoming details are only a few of the noteworthy economic details on the horizon. If you have questions about what other fundamental data we are tracking or believe could affect your financial life, we are always here to talk.
Monday: Durable Goods Orders, Pending Home Sales Index
Tuesday: GDP, Consumer Confidence
Wednesday: Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg Index,
Friday: PMI Services Index, ISM Non-Mfg Index
|Data as of 2/24/2017||1-Week||Since 1/1/17||1-Year||5-Year||10-Year|
|Standard & Poor's 500||0.69%||5.74%||22.67%||14.67%||6.31%|
|US Corporate Bond Index||0.75%||1.40%||5.48%||3.67%||5.16%|
|Data as of 2/24/2017||1 mo.||6 mo.||1 yr.||5 yr.||10 yr.|
|Treasury Yields (CMT)||0.40%||0.65%||0.80%||1.80%||2.31%|
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.