What we think

UNCATEGORIZED

In the Markets – Week-Ending January 20th

by Peter J. Creedon

Newsletter: In the Markets – Week-Ending January 20th 
Crystal Brook Advisors
We Make Financial Planning Crystal Clear

United States:  Coming in line with expectations, CPI inflation rose 0.3 percent in 7% December. Headline CPI is now running above 2 percent for the first time 6% since mid-2014, when the 2014-2016 collapse in oil prices began. As 5% expected, gasoline prices were a major driver of December’s increase, rising 4% 3.0 percent. Lower natural gas prices and steady electricity prices, however, tempered the overall gain in energy costs. (1)  Outside of food and energy, prices continue to gradually increase. The core index rose 0.2 percent last month, bringing the year-over-year rate back up to 2.2 percent. Gains were fairly widespread, but once again were driven by the service sector. Core services inflation rose 0.3 percent in December on a rise in shelter costs of the same magnitude. Transportation services also 4% provided a notable boost, increasing 0.6 percent on higher costs for motor vehicle insurance and airline fares. Out-of-pocket costs for medical care 2% services edged up 0.1 percent last month and 3.9 percent over the past year.  Pricing power in the goods sector remains more limited, but showed some improvement in December. Core goods prices were flat last month after -2% declining 0.6 percent over the past year. A 0.7 percent drop in apparel -4% prices offset gains in vehicle prices, medical goods, alcohol and tobacco. (1)

Europe: Valdis Dombrovskis, European Commission vice president for the euro, said every country in the 28-nation European Union, including Greece, is expected to grow this year. Eurozone growth is forecast to accelerate from 1.5% this year to 1.7% in 2018. (2)  EU gross domestic product is finally above precrisis levels, while unemployment in the bloc is down to 2009 levels. Government debt and deficits are also down. (2)  “The economic recovery, while quite modest, is resilient to different risk factors, political uncertainty being one of them,” Mr. Dombrovskis said. (2)

Asia: Global consulting firm Deloitte has some soothing news for those worried about the economic fallout in Asia from possible trade war- young spenders in India and China will continue to fuel growth in the region. (3)  These consumers are “inherently optimistic and incredibly open to innovation…enthusiastic importers as well as formidably competitive exporters,” according to a Deloitte January report titled “Voice of Asia.” (3)  President-elect Donald Trump has repeatedly singled out China as a target for tough talks on trade, saying the Middle Kingdom artificially weakens its currency for export advantages and is not as open as it should be to U.S. goods. China, the second largest holder of U.S. debt, has fired back that its trade policies follow global rules. In the case of India, the country manufactures a large share of generic drugs that reach U.S. shores, another target for Trump as he seeks on-shoring of jobs linked to products sold widely in the U.S. (3)

Latin America: With its January economic outlook update, the International Monetary Fund (IMF) has become more pessimistic about Latin America. The Washington-based global economic authority is now forecasting regional GDP growth of just 1.2% in 2017, down from the 1.6% projection it made in October. It also lowered its 2018 prediction for Latin America by 0.1% to a revised projection of 2.1% expansion. (4)  The major cause for the regional downgrade was a cut in the growth prospects for both Brazil (which it dropped by 0.3%) and Mexico (0.6%), the region’s two largest economies. While it still sees Brazil climbing out of recession in 2017, the new forecast of 0.2% economic expansion next year leaves much less room for error than the IMF’s earlier 0.5% projection. (4)

Monday 1/16
  • Markets Closed Due To Martin Luther King, Jr. Day
Tuesday 1/17
  • The Dow Jones Industrial Average DJIA, +0.44%  slid 58.96 points, or 0.3%, to close at 19,826.77. The S&P 500 index SPX, +0.31%  declined 6.75 points, or 0.3%, to end at 2,267.89, with financials and health-care stocks leading the losses. U.S. markets were closed on Monday for Martin Luther King Jr. Day holiday. (5)
Wednesday 1/18
  • The Dow Jones Industrial Average DJIA, +0.31% traded within a 89-point range, and finished down 22.05 points, or 0.1%, at 19,804.72, its lowest close of 2017. Shares of Dow component UnitedHealth Group Inc. UNH, -0.11% off 1.8%, and Exxon Mobil Corp. XOM, +0.87% down 1.2%, offset roughly 1% gains in American Express Co. AXP, -1.07% and Travelers Cos. Inc. TRV, -0.15% (5)
Thursday 1/19
  • Stocks slipped on the eve of President-elect Donald Trump’s inauguration as investors appear unsatisfied with the solid earnings announcements from the banking industry this week. As earnings season continues to heat up, perhaps caution will be the theme. (6) Nevertheless, it was a big day for Netflix. The stock gained more than 4.4% after the release of its fourth-quarter financial results, which highlighted the success of its global expansion and underscored the worldwide popularity of its original content. (6)
Friday 1/20
  • The stock-market rally that accelerated in the wake of Donald Trump’s November election victory lost some steam last month, but the S&P 500 finished Thursday with its biggest election-to-inauguration gain since Bill Clinton won a second term in 1996. (5)

Market Close

  • U.S. stocks closed higher Friday after coming off intraday highs as Donald Trump was sworn in as the 45th president of the U.S. In his inauguration speech, the new president reiterated his protectionist stance but did not offer details on how he would go about pursuing his agenda. The S&P 500 SPX, +0.34% rose 7 points, or 0.3%, to close at 2,271 for a weekly decline of 0.2%. The Dow Jones Industrial Average DJIA, +0.48% gained 92 points, or 0.5%, to finish at 19,824, falling 0.3% for the week. The Nasdaq Composite Index COMP, +0.28% advanced 15 points, or 0.3%, to close at 5,555, down shed 0.3% on the week. (5)

Contributor: Thomas Padula

Sources:  (1),Wells Fargo Economics Group (2),Wall Street Journal  (3),CNBC (4),Finance Columbia (5),MarketWatch (6), Yano Finance