Performance for Week Ending 12/8/17:
The Dow Jones Industrial Average (Dow) added 0.40%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) gained 0.25%, the Standard & Poor’s 500 Index (S&P 500) tacked on 0.35% and the Nasdaq Composite Index (NASDAQ) dipped 0.1%. Sector performance was positive with 7 of the 11 S&P groups finishing higher. The Financials sector (+1.50%) was the best performer while Utilities (-1.03%) was the worst.
||Closing Price 12/8/17
||Percentage Change for Week Ending 12/8/17
||Year-to-Date Percentage Change Through 12/8/17
*See below for Index Definitions
MARKET OBSERVATIONS: 12/4/2017 – 12/8/17
Stocks finished the week mostly higher reflecting stabilization in the recently beaten up Technology sector, progress on tax reform, and a temporary deal to avoid a government shutdown. Cyclical sectors, which tend to benefit from a pickup in economic activity, outpaced the broader market while defensive plays (Utilities, Telecom, and Healthcare) underperformed.
Tax reform continued to inch forward last week with House and Senate Republicans working on a compromise tax-overhaul plan which they aim to have on President Trump’s desk within the next couple weeks. Meanwhile, a partial shutdown of the government was avoided (at least for now) after Congress passed a temporary continuing resolution that will keep the government running through Dec. 22. The ‘kick the can down the road’’ action will now set up a showdown right before the Christmas holiday. While there will be some headline risk ahead of the new deadline, an eleventh hour solution will likely be reached.
Next on the Agenda, Infrastructure Spending: A report that President Trump is readying an infrastructure plan for a January roll-out, added to the positive tone. The report from Bloomberg, said a White House infrastructure plan is nearing completion and it calls for allocating at least $200 billion in federal funds over 10 years to spur at least $800 billion in spending by states, localities and the private sector. While the equity markets rallied on the news, the report seemed to spook the bond market especially as it followed an update from rating agency Standard and Poor’s saying US tax cuts plus any additional fiscal policy initiatives could prompt negative action on its credit rating.
Market View: While there are many moving pieces, we continue to believe the bull market remains intact and the “Goldilocks” economic environment (not too hot, not too cold) should set the stage for additional upside over the coming quarters. At the end of the day it’s fundamentals (the economy, earnings, interest rates) that matter, and from a macro point of view, the world is enjoying a period of synchronized global growth, which has resulted in a favorable turn in the earnings environment. In addition, valuation levels—while certainly elevated—are far from extreme. The markets have had an incredible run over the course of this year and it wouldn’t be surprising to see investors lock in gains over the coming weeks. However, if the market were to stage a near-term pullback, it would be viewed as healthy and an opportunity to add equity exposure to portfolios.
The Week Ahead: The focal point of the coming week will be the two-day (Tuesday & Wednesday) Federal Open Market Committee meeting. The Fed is highly likely to boost rates by a quarter percent at the conclusion of the meeting (Bloomberg’s World Interest Rate Probability function shows a 98.3% chance of a rate hike). More interesting will be the quarterly release of the Summary of Economic Projections (SEP), with all eyes expected to be on the so called “dot plot.” The last SEP suggested the Fed would raise rates three times during 2018. The question now becomes whether the central bank will address the growing likelihood of tax reform and how it will impact the path forward. Guggenheim’s view is that the Fed will hike rates four times next year. This meeting will also mark one of the last meetings for Fed Chair Yellen, as she is set to pass the torch to Fed Governor Jerome Powell in early February.
The data calendar contains a few notable items, including; the November Producer Price Index (PPI) and November Consumer Price Index (CPI), November retail sales, the December Empire State Manufacturing Survey and November industrial production. The earnings calendar will be almost nonexistent with only a few members of the S&P 500 scheduled to release results.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.
Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Indices do not include any expenses, fees, or sales charges, which would lower performance. Indices are unmanaged and should not be considered an investment. It is not possible to invest directly in an index.
The individual companies mentioned in this piece were for informational purposes only and should not be viewed as recommendations.
The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. This document contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Information in this report does not pertain to any investment product and is not a solicitation for any product. This material has been prepared using sources of information generally believed to be reliable. No representation can be made as to its accuracy.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
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*Assets under management is as of 09.30.2018 and includes leverage of $11.8bn.
Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
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