Weekly Market Update – April 2, 2018

Markets were closed on March 30 for Good Friday, but in the four days of trading, stocks recovered some of this year’s losses.1 For the week, the S&P 500 added 2.09%, the Dow gained 2.67%, and the NASDAQ increased by 1.03%.2 International stocks in the MSCI EAFE grew 0.81%.3

Last week also marked the end of the year’s 1st quarter. Our next market update will share a recap of key performance details and events from January through March.

In this report, we will consider findings from last week and offer some perspective on the data.

What We Learned Last Week

The Economy Expanded More Than Thought
We received the final reading of 4th quarter 2017 Gross Domestic Product (GDP), and the numbers were higher than expected. Between October and December last year, GDP grew at a 2.9% annualized rate. In particular, consumer spending contributed significantly to our economic growth.4

Consumers Remained Confident
Consumer Sentiment readings reached a 14-year high in March and may be a sign that spending was also on the rise last month.5 Meanwhile, the Consumer Confidence report showed slightly lower readings than in February but continued to stay high. Though respondents’ confidence in the stock market wavered, their strong assessments of the labor market helped maintain solid numbers.6

Personal Incomes Rose
Personal income grew 0.4% in February and has increased 3.7% over the past 12 months. Consumers also spent more money, and data on personal debt and financial obligations indicates that they still have more room to spend.7

The Takeaway

Examined together, this data seems to indicate that consumers are confident about the economy and their job prospects —- and are continuing to earn and spend more. Considering that approximately 69% of the U.S. economy comes from consumer spending, these developments should be positive news.

That said, every market environment has risks, and no economy is perfect. We are here to help you navigate your finances and make sense of developing news. If you have any questions, contact us any time.

ECONOMIC CALENDAR

Monday: PMI Manufacturing Index, ISM Mfg Index, Construction Spending
Tuesday: Motor Vehicle Sales
Wednesday: ADP Employment Report, Factory Orders, ISM Non-Mfg Index
Thursday: Jobless Claims
Friday: Employment Situation


S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896. The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia. The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

You cannot directly invest in an index. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Diversification does not guarantee profit nor is it guaranteed to protect assets. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. Drake & Associates does not offer tax or legal advice.

All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Sources:
1 https://www.cnbc.com/2018/03/29/us-stock-futures-dow-data-tech-and-politics-on-the-agenda.html
2 http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI&region=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
3 https://www.msci.com/end-of-day-data-search
4 http://wsj-us.econoday.com/byshoweventfull.asp?fid=485677&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
5 http://wsj-us.econoday.com/byshoweventfull.asp?fid=485847&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
6 http://wsj-us.econoday.com/byshoweventfull.asp?fid=485916&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
7 https://www.ftportfolios.com/Commentary/EconomicResearch/2018/3/29/personal-income-rose-0.4percent-in-february
8 https://www.thebalance.com/consumer-spending-trends-and-current-statistics-3305916