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.
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 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.
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
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.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of CWM, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.