January 2017
THE MONTH IN BRIEF
THE MONTH IN BRIEF
While the Dow Jones Industrial Average did not top 20,000 in
December, it did advance nicely, gaining 3.34%. The Federal Reserve took its
interest rate target to 0.50-0.75%, adjusting the federal funds rate for just
the second time in two years; around the world, other central banks held rates
steady, and one even pledged additional easing. Oil prices jumped. Closely
watched consumer confidence and purchasing manager indices rose, and
unemployment declined. Home sales improved even as mortgage rates neared highs
unseen since 2011. Wall Street and Main Street seemed optimistic about the
economy’s future.1,2
DOMESTIC ECONOMIC HEALTH
The Fed adjusted its dot-plot for the next three years as it raised the benchmark interest rate by a quarter-point in December. Its latest forecast projects two to three rate hikes per year through 2019, with three occurring this year. Fed policymakers see the economy expanding 2.1% in 2017.2
The Fed adjusted its dot-plot for the next three years as it raised the benchmark interest rate by a quarter-point in December. Its latest forecast projects two to three rate hikes per year through 2019, with three occurring this year. Fed policymakers see the economy expanding 2.1% in 2017.2
Employers grew their payrolls by 178,000 net new hires in November,
noted the Department of Labor’s latest jobs report. Unemployment dropped 0.3%
to 4.6%; the jobless rate was last that low in August 2007. (The broader U-6
rate, which also counts the underemployed, declined 0.2% to 9.3%, the lowest
figure since April 2008.) The average hourly wage was $25.89, up 2.5% in the
past year.3
The Institute for Supply Management’s manufacturing purchasing
managers index gained 1.3 points in November, moving up to 53.2. ISM’s service
sector PMI also improved, coming in at 57.2, 2.4 points above its October
level. (In fact, this was the best reading for the service sector PMI in 13
months.)4,5
Speaking of goods and services, the month ended with the
federal government’s final assessment of third-quarter growth: 3.5%. Hard good
orders, however, fell 4.6% in November, 6.6% with defense orders subtracted;
industrial output was off 0.4% in the eleventh month of the year.6,7
The Fed’s core PCE price index was flat for November and
showed a 1.6% yearly advance. Both the headline and core Consumer Price Index
rose 0.2% for November; in contrast, the headline and core Producer Price Index
each rose 0.4%.6,7
The Conference Board’s monthly index of consumer confidence
jumped to 113.7 in December, rising 4.3 points. The year’s final University of
Michigan household sentiment index came in slightly higher at a reading of
98.2.4,6
Household confidence aside, November’s personal spending and
retail sales numbers were run-of-the-mill. The Department of Commerce stated
that consumer spending rose a modest 0.2% in November, while retail purchases
were up but 0.1%, 0.2% with auto sales factored out. Personal incomes were
flat.6,7
GLOBAL ECONOMIC HEALTH
China’s official purchasing managers index showed a fifth consecutive month of factory growth in December; though, the 51.4 mark was 0.3 points below the November reading. Greater infrastructure spending and increased home construction in the PRC helped Chinese manufacturing sustain its pace in the second half of the year; although, factory output moderated slightly in December. The Bank of Japan left its key interest rate in negative territory last month, a reassuring decision for investors in the Asia-Pacific region.8,9
China’s official purchasing managers index showed a fifth consecutive month of factory growth in December; though, the 51.4 mark was 0.3 points below the November reading. Greater infrastructure spending and increased home construction in the PRC helped Chinese manufacturing sustain its pace in the second half of the year; although, factory output moderated slightly in December. The Bank of Japan left its key interest rate in negative territory last month, a reassuring decision for investors in the Asia-Pacific region.8,9
The
European Central Bank announced an extension of its bond-purchase program
through December 2017. The caveat was that the ECB would trim the monthly
amount of those purchases, starting in March, from €80 billion to €60 billion.
Eurozone inflation was just 0.6% in the year’s last report, with the most recent
data (Q3) putting economic growth at 0.3%. Italian prime minister Matteo Renzi
resigned early in December after the effort of his Democratic Party to change
Italy’s constitution was rejected by voters. That happened just as it appeared
the country’s third-largest bank would need a bailout. As banking problems
continued, observers wondered if the tenure of his replacement, Paolo
Gentiloni, would be short.10,11
WORLD MARKETS
Major European stock indices rallied their way toward 2017 in December. Out in front, Germany’s DAX advanced 7.90%. Going clockwise around the continent from there, Russia’s Micex gained 6.07%; France’s CAC 40, 6.20%; and Spain’s IBEX, 7.64%. Across the English Channel, the U.K.’s FTSE 100 gained 5.29%.12
Major European stock indices rallied their way toward 2017 in December. Out in front, Germany’s DAX advanced 7.90%. Going clockwise around the continent from there, Russia’s Micex gained 6.07%; France’s CAC 40, 6.20%; and Spain’s IBEX, 7.64%. Across the English Channel, the U.K.’s FTSE 100 gained 5.29%.12
The Hang Seng and Shanghai Composite
suffered some large December losses. The former fell 3.46%; the latter, 4.51%.
Argentina’s MERVAL slipped 3.01% for the month; Brazil’s Bovespa, 1.24%.
December brought nice gains for some other indices in the Americas and the
Asia-Pacific region, however. The Nikkei 225 rose 4.40%; the Australian All
Ordinaries, 3.94%; the South Korean KOSPI, 2.43%. Just north of us, the TSX
Composite added 1.36%; to our south, the Bolsa advanced 0.72%. India’s Sensex
was essentially flat, off just 0.10% for the month. As for notable regional and
multinational benchmarks, the FTSE Eurofirst 300 rose 5.74%; the MSCI World,
2.29%. The MSCI Emerging Markets fell just 0.06%.12,13
COMMODITIES MARKETS
With OPEC nations set to reduce output, the
price of oil was poised to rise – and rise it did. Crude finished the month at
$53.89 on the NYMEX, gaining 10.02% in December. How much did oil advance in
2016? 46.12%. Other marquee energy futures had large December gains: heating
oil rose 10.79%; natural gas, 11.89%; and unleaded gasoline, 12.85%. The major
crop futures mostly lost ground – cotton slipped 1.30%; sugar, 1.51%; soybeans,
2.81%; coffee, 6.85%; and cocoa, 11.22%. Wheat and corn were exceptions. The
former commodity gained 6.84%; the latter, 4.16%.14
December was not a good month for metals.
Gold closed the year at $1,152.00 on the COMEX, losing 1.74%; silver futures
declined 3.25% to end 2016 at $15.96. Across 2016, gold gained 7.18%, and
silver, 15.04%. Copper lost 4.67% in December; platinum, 0.77%.14
REAL ESTATE
On the final Friday of 2016, Bloomberg found the average interest rate on a 30-year fixed rate mortgage at 4.09%, approaching a five-year high. A day earlier (December 29), Freddie Mac’s Primary Mortgage Market Survey measured an average of 4.32%, up from 4.08% on December 1. Freddie also charted the following December rises for other key home loan varieties: 5/1-year ARM, 3.15% to 3.30%; 15-year FRM, 3.34% to 3.55%.15,16
On the final Friday of 2016, Bloomberg found the average interest rate on a 30-year fixed rate mortgage at 4.09%, approaching a five-year high. A day earlier (December 29), Freddie Mac’s Primary Mortgage Market Survey measured an average of 4.32%, up from 4.08% on December 1. Freddie also charted the following December rises for other key home loan varieties: 5/1-year ARM, 3.15% to 3.30%; 15-year FRM, 3.34% to 3.55%.15,16
The latest data indicated that home sales had picked up in November.
Resales increased 0.7% to an annual pace of 5.61 million units, according to a
report from the National Association of Realtors. New home buying jumped 5.2%
in the eleventh month of 2016 by the measure of the Census Bureau. As for home
prices, the October edition of the S&P/Case-Shiller home price index showed
a 5.6% year-over-year gain, as opposed to 5.4% in September.4,6
Looking to the near future in the housing market, the NAR
reported a 2.5% drop in pending home sales in November following the 0.1%
increase for October. Permits for new projects fell 4.7% in November as fall
ebbed into winter; groundbreaking declined 18.7%.4,6
LOOKING BACK…LOOKING FORWARD
On December 30, the most-watched U.S. indices closed out the year at the following levels: Dow Jones Industrial Average, 19,762.60; S&P 500, 2,238.83; NASDAQ Composite, 5,383.12; Russell 2000, 1,357.13; CBOE VIX, 14.04. Here are the monthly gains that took them to those levels: DJIA, 3.34%; S&P, 1.82%; NASDAQ, 1.12%; RUT, 2.63%; VIX, 5.33%. The S&P GSCI commodity index was the December front-runner on Wall Street, rising 5.56%. Defying the naysayers, the stock market performed quite respectably last year.1
On December 30, the most-watched U.S. indices closed out the year at the following levels: Dow Jones Industrial Average, 19,762.60; S&P 500, 2,238.83; NASDAQ Composite, 5,383.12; Russell 2000, 1,357.13; CBOE VIX, 14.04. Here are the monthly gains that took them to those levels: DJIA, 3.34%; S&P, 1.82%; NASDAQ, 1.12%; RUT, 2.63%; VIX, 5.33%. The S&P GSCI commodity index was the December front-runner on Wall Street, rising 5.56%. Defying the naysayers, the stock market performed quite respectably last year.1
Could the bull run slow to a trot this month? Or
will the Dow rise above 20,000? Entering 2017, there are some factors that
could certainly provide a tailwind for the bull market. If consumer confidence
remains high, and employment and wage data continues showing improvement, this
bodes well for consumer spending and, by extension, near-term corporate
earnings. If infrastructure spending ramps up this year, the resulting job
growth could also foster wage growth. So, while this current bull market is one
of the longest, bullish sentiment has definitely increased, and January could
be another month of gains for the major U.S. indices.
UPCOMING
ECONOMIC RELEASES: The list for the rest of
January includes the December ISM service sector PMI and Challenger job cut
report (1/5); the Department of Labor’s December jobs report and data on
November factory orders (1/6); the December PPI, December retail sales, and the
initial January University of Michigan consumer sentiment index (1/13); a new
Federal Reserve Beige Book, the December CPI, and December industrial output
(1/18); December housing starts and building permits (1/19); December existing
home sales (1/24); December new home sales (1/26); the first estimate of Q4
growth, January’s final University of Michigan consumer sentiment index, and
December hard goods orders (1/27); the December PCE price index, December
consumer spending, and December pending home sales (1/30); and, lastly, the
January consumer confidence index from the Conference Board and the November
S&P/Case-Shiller house price index (1/31).
Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC
Bogetto Financial is not affiliated with First Heartland Capital, Inc.
Bogetto & Associates does not provide legal or tax advice. These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.
This material was prepared by
MarketingPro, Inc., and does not necessarily represent the views of the
presenting party, nor their affiliates. The information herein has been derived
from sources believed to be accurate. Please note - investing involves risk,
and past performance is no guarantee of future results. Investments will
fluctuate and when redeemed may be worth more or less than when originally
invested. This information should not be construed as investment, tax or legal
advice and may not be relied on for the purpose of avoiding any Federal tax
penalty. This is neither a solicitation nor recommendation to purchase or sell
any investment or insurance product or service, and should not be relied upon
as such. All market indices discussed are unmanaged and are not illustrative of
any particular investment. Indices do not incur management fees, costs and
expenses, and cannot be invested into directly. All economic and performance
data is historical and not indicative of future results. The Dow Jones
Industrial Average is a price-weighted index of 30 actively traded blue-chip
stocks. The NASDAQ Composite Index is a market-weighted index of all
over-the-counter common stocks traded on the National Association of Securities
Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of
the common stocks of 500 leading companies in leading industries of the U.S.
economy. The Russell 2000 Index measures the performance of the
small-cap segment of the U.S. equity universe. The CBOE Volatility Index®
(VIX®) is a key measure of market expectations of near-term volatility conveyed
by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates
two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE
Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific
Exchange). NYSE Group is a leading provider of securities listing, trading and
market data products and services. The New York Mercantile Exchange, Inc.
(NYMEX) is the world's largest physical commodity futures exchange and the
preeminent trading forum for energy and precious metals, with trading conducted
through two divisions – the NYMEX Division, home to the energy, platinum, and
palladium markets, and the COMEX Division, on which all other metals trade. The
DAX 30 is a Blue Chip stock market index consisting of the 30 major German
companies trading on the Frankfurt Stock Exchange. The MICEX 10 Index (Russian:
Индекс ММВБ10) is an unweighted price index that tracks the ten most liquid
Russian stocks listed on MICEX-RTS in Moscow. The CAC-40 Index is a
narrow-based, modified capitalization-weighted index of 40 companies listed on
the Paris Bourse. The IBEX 35 is the benchmark stock market index of the Bolsa
de Madrid, Spain's principal stock exchange. The FTSE 100 Index is a share
index of the 100 companies listed on the London Stock Exchange with the highest
market capitalization. The Hang Seng Index is a free float-adjusted market
capitalization-weighted stock market index that is the main indicator of the
overall market performance in Hong Kong. The SSE Composite Index is an index of
all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange.
The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most
important index of the Buenos Aires Stock Exchange. The Bovespa Index is a
gross total return index weighted by traded volume & is comprised of the
most liquid stocks traded on the Sao Paulo Stock Exchange. Nikkei 225 (Ticker:
^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei
average is the most watched index of Asian stocks. The All Ordinaries (XAO) is
considered a total market barometer for the Australian stock market and
contains the 500 largest ASX-listed companies by way of market capitalization.
The Korea Composite Stock Price Index or KOSPI is the major stock market index
of South Korea, representing all common stocks traded on the Korea Exchange. The
S&P/TSX Composite Index is an index of the stock (equity) prices of the
largest companies on the Toronto Stock Exchange (TSX) as measured by market
capitalization. The Mexican Stock Exchange commonly known as Mexican Bolsa,
Mexbol, or BMV, is the only stock exchange in Mexico. The BSE SENSEX (Bombay
Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE)
or simply the SENSEX, is a free-float market capitalization-weighted stock
market index of 30 well-established and financially sound companies listed on
the Bombay Stock Exchange (BSE). The FTSE Eurofirst 300 measures the
performance of Europe's largest 300 companies by market capitalization and
covers 70% of Europe's market cap. The MSCI World Index is a free-float
weighted equity index that includes developed world markets, and does not
include emerging markets. The MSCI Emerging Markets Index is a float-adjusted
market capitalization index consisting of indices in more than 25 emerging
economies. The US Dollar Index measures the performance of the U.S. dollar
against a basket of six currencies. The S&P GSCI is the first major
investable commodity index; it is one of the most widely recognized benchmarks
that is broad-based and production weighted to represent the global commodity
market beta. Additional risks are associated with
international investing, such as currency fluctuations, political and economic
instability and differences in accounting standards. This material represents
an assessment of the market environment at a specific point in time and is not
intended to be a forecast of future events, or a guarantee of future results.
MarketingPro, Inc. is not affiliated with any person or firm that may be
providing this information to you. The publisher is not engaged in rendering
legal, accounting or other professional services. If assistance is needed, the
reader is advised to engage the services of a competent professional.
Citations.
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[12/19/16]
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[12/8/16]
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[12/30/16]
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bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F30%2F11&x=0&y=0
[12/30/16]
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[12/30/16]
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bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F30%2F11&x=0&y=0
[12/30/16]
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bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F29%2F06&x=0&y=0
[12/30/16]
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bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F29%2F06&x=0&y=0
[12/30/16]
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[12/30/16]
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[12/30/16]
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[12/30/16]Financial Health...For Now & Tomorrow
Contact us Today
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
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