After a brief pause during inauguration week, stocks continued to climb last week. The S&P 500 added 1.03%, the NASDAQ was up 1.90%, and the MSCI EAFE increased by 1.29%.[1] The Dow also grew, adding 1.34%, ending the week above while hitting 20,000 for the first time ever.[2]
Consumer confidence matched this positive performance, as the University of Michigan Consumer Sentiment measurement beat expectations in January and reached the highest levels since 2004.[3] However, one piece of data we received last week gave a less rosy view of the economy: initial GDP reports.
What Happened: GDP Missed Projections
On Friday, we received the first report on real GDP for the fourth quarter of 2016. Growth declined significantly to come in at 1.9%—down from the third quarter’s reading of 3.5%.[4]
Looking deeper
Many aspects of our economy showed solid growth in the fourth quarter. Household purchases grew, business-equipment spending advanced for the first time in over a year, and inventory accumulation increased.[5] Net exports, however, pulled growth down by 1.7%—the biggest drag since 2010—as we saw a jump in imports coupled with a decline in exports.[6] Working to increase U.S. exports is important because it can help strengthen America’s economy, support additional jobs, and promote sustainable growth.
Without net exports pulling down economic expansion, fourth-quarter GDP could have been even higher than in the third quarter. Trade is integral to our economy, and changes in the balance between imports and exports measurably effect growth. The new administration’s potential plans to tax Mexican imports, change trade relationships with China, and restrict visitors from certain countries could affect our imports and exports—and thus our economy.[7]
Between lagging GDP and the Dow reaching historic levels, this week showed us a range of perspectives on where the economy now stands. The markets will always have uncertainty and unanswered questions, and—as always—we must stay focused on the fundamentals that drive performance in the long term. For now, we will continue monitoring policy developments and the trade deficit to determine how they may impact economic growth in 2017 and beyond. We will also pay close attention to the economic data that gives the deep insight upon which we build our strategies for pursuing your goals.
ECONOMIC CALENDAR:
Monday: Personal Income and Outlays
Tuesday: Consumer Confidence
Wednesday: ADP Employment Report, ISM Manufacturing Index, FOMC Meeting Announcement
Thursday: Productivity and Costs
Friday: Employment Situation, Factory Orders, ISM Non-Manufacturing Index
| Data as of 1/27/2017 | 1-Week | Since 1/1/17 | 1-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 | 1.03% | 2.50% | 21.87% | 14.86% | 6.14% |
| DOW | 1.34% | 1.68% | 26.02% | 11.74% | 6.09% |
| NASDAQ | 1.90% | 5.16% | 26.69% | 20.20% | 13.24% |
| U.S. Corporate Bond Index | 0.00% | 0.16% | 5.37% | 3.95% | 6.83% |
| International | 1.29% | 2.11% | 13.29% | 3.16% | -1.90% |
| Data as of 1/27/2017 | 1 mo. | 6 mo. | 1 yr. | 5 yr. | 10 yr. |
| Treasury Yields (CMT) | 0.50% | 0.62% | 0.81% | 1.94% | 2.47% |
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Tax Tips
Why to File Your Tax Return Online
If you’re still filing taxes by paper, you may be creating unnecessary work for yourself. The IRS accepts electronically filed tax returns, which is the fastest and safest way to file. Here are some top reasons why the IRS suggests you e-file your tax return.
- Safe and Secure: IRS e-file has strict security guidelines and uses modern encryption technology for protecting returns filed online. The IRS has safely and securely processed over 1 billion returns online. The IRS recently put new safeguards in place to protect filers.
- Faster Refunds: When filing online, e-file usually helps prevent mistakes and enables you to receive your refund more quickly. You can streamline this process by combining e-file with a direct deposit into your bank account, which usually pays refunds in less than 21 days.
- Healthcare Coverage Reporting: IRS e-file will help you include reporting about your healthcare coverage. The software will walk you through each line that relates to the Affordable Care Act.
- Payment Options: When you file online, IRS Direct Pay allows you to pay taxes you owe electronically from your bank account. You can also pay by credit or debit card. Visit gov/payments for further details.
Tip courtesy of IRS.gov[8]
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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.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor’s 500 (S&P 500) 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 S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.
The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
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.
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.
You cannot invest directly in an index.
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.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives 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.
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[1] http://finance.yahoo.com/quote/%5EGSPC/history?period1=1484888400&period2=1485493200&interval=1d&filter=history&frequency=1d
http://finance.yahoo.com/quote/%5EIXIC/history?period1=1484888400&period2=1485493200&interval=1d&filter=history&frequency=1d
https://www.msci.com/end-of-day-data-search
[2] http://finance.yahoo.com/quote/%5EDJI/history?period1=1484888400&period2=1485493200&interval=1d&filter=history&frequency=1d
[3] http://www.cnbc.com/2017/01/27/consumer-sentiment-index-hits-985-in-january-vs-estimate-of-981.html
[4] http://www.cnbc.com/2017/01/27/us-markets.html
[5] https://www.bloomberg.com/news/articles/2017-01-27/u-s-economic-momentum-faces-wild-card-in-trump-s-trade-policy
[6] https://www.bloomberg.com/news/articles/2017-01-27/u-s-economic-momentum-faces-wild-card-in-trump-s-trade-policy
[7] https://www.bloomberg.com/news/articles/2017-01-27/u-s-economic-momentum-faces-wild-card-in-trump-s-trade-policy
[8] https://www.irs.gov/uac/seven-reasons-taxpayers-should-efile-their-taxes-in-2017
