Weekly Market Commentary January 8, 2018

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Global stock markets are moving along at a torrid pace. After a strong fourth quarter, the S&P 500 soared 2.6% last week. Global stocks did slightly better as the MSCI ACWI rose 2.7%. The Bloomberg BarCap Aggregate Bond Index dropped 0.3% last week.

Performance Insights

The S&P 500 is up nearly 9% since the beginning of the fourth quarter in 2017. Three quick thoughts to keep in mind:

  • A full year’s price appreciation occurred in just over three months.
  • Based on interest rates and valuations, we expect long-term rates of return to be slightly lower than average.
  • Statistically, the stock market produces very strong results more often than expected.

2018 could easily be another great year, but the risks are higher than in 2017.

Key points for the week

  • U.S. jobs numbers were lower than expected in December.
  • Record-setting low temperatures this winter are giving the energy sector a boost.
  • Sears and other large retailers are closing multiple locations as executives rethink their business strategies.

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.

U.S. Added Fewer Jobs Than Expected in December

The U.S. added fewer jobs than expected in December, but a positive outlook on the economy remains. This decrease is to be expected as the U.S. is near full employment. Wages increased a healthy 0.3%, and the jobless rate is at 4.1%, its lowest point since 2000. The wage gain metric will be a point of focus as we gauge the impact of the tax overhaul.

Stocks to Watch as a Major Snowstorm Hits the East Coast

This frigid winter showed it is far from over as a winter storm reached the East Coast last week. There are clear beneficiaries of the icy weather that will continue to prosper through the storm. Natural gas investors have seen major returns as futures contracts appreciated 2%. This has helped make energy a leading sector in early 2018 after lagging in 2017.

Sears is closing over 100 more stores

Sears is closing more than 100 Kmart and Sears stores in January. Macy’s announced last year it would close nearly 100 locations, and it expects to close 11 more in 2018. These closings are due to changing strategies as brick-and-mortar retail loses market share each year. Sears has begun listing its brands on Amazon, and Macy’s is focusing on its prime locations and selling online from its own platform.

Fun story of the week

Fattening Up Your 401(k) Will Be Easier Than Losing Weight in 2018

New Year’s resolutions historically have miserable success rates. But a goal-setting website called StickK has developed a platform geared to help people succeed. From data it has collected, StickK has found that when using a “referee,” a person who verifies progress, participants had a 61% success rate in their finance goals and a 47% success rate in their fitness goals. In today’s economic environment, it may be easier to fatten up your finances than yourself.


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