Performance for Week Ending 6/2/2017:
The Dow Jones Industrial Average (Dow) gained 0.60%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) added 0.95%, the Standard & Poor’s 500 Index (S&P 500) finished up 0.96% and the Nasdaq Composite Index (NASDAQ) tacked on 1.54%. Sector performance was positive with 9 of the 11 S&P sector groups finishing higher. The Telecom (+2.33%) sector posted the best gain while Energy (-2.23%) posted the worst.
||Closing Price 6/2/2017
||Percentage Change for Week Ending 6/2/2017
||Year-to-Date Percentage Change Through 6/2/2017
*See below for Index Definitions
MARKET OBSERVATIONS: 5/29/2017 – 6/2/2017
Stocks finished the week higher with the Dow, S&P 500 and Nasdaq all closing at new all-time highs as investors shrugged off the sluggish May payroll report, a slump in the price of oil, and a rally in the Treasury market that left the yield on the 10-year note at the lowest level of the year. Expectations surrounding the timely implementation of the Trump Administrations pro-growth policies have all but evaporated, however, investors now appear to be looking beyond the sideshow (politics) and focusing on the main event (macro environment).
While the May payroll report fell short of economist’s expectations, the economy in fact still added 138K jobs. In addition, the unemployment rate now stands at the lowest level in 16 years, consumer confidence is at the highest level in over a decade, and earnings in the just reported first quarter were the strongest in over 5 years.
The perceived beneficiaries of President Trump’s pro-growth policies have for the most part given back their post-election gains. Investor expectations surrounding fiscal policy initiatives are now very low, which in turn leaves plenty of room for upside surprise. The Republican Party desperately needs a legislative win ahead of next year’s mid-term elections and the odds of seeing some sort of agreement on tax reform/tax by year-end still seem better than a coin toss. This week’s nearly 1.7% rally in small-cap stocks, which in general have higher effective tax rates and would be a prime beneficiary of lower rates, may be an early sign that investors haven’t totally giving up on lower taxes.
Outlook Unchanged: Following the recent run up in the markets, a near-term pullback wouldn’t be surprising. However, on an intermediate term basis, the outlook for the US market still remains favorable. The economy continues to move forward and, most importantly, the earnings environment has turned positive. According to Bloomberg, earnings are forecast to post solid year-over-year growth trends in the coming quarters, which in turn, should help taper concerns over current valuation levels. If the market were to stage a pullback in the coming weeks/months, it would be viewed as healthy and corrective in nature and not the start of a broader leg lower - in other words, a good buying opportunity, especially for longer-term investors.
The Week Ahead: The focus of the coming week will be on Thursday when the European Central Bank (ECB) meets, the UK holds a general election, and former FBI Director James Comey testifies before the Senate Intelligence Committee. While the ECB is not expected to make any changes to its current monetary program, investors will be watching for any shift in forward guidance or the assessment of the risks for insight into when the central bank may begin winding down its stimulus efforts. In the UK, Prime Minister Theresa May called the election in an attempt to gain an increased parliamentary majority to back her Brexit negotiating stance. Pre-election polls show the opposition Labour Party led by Jeremy Corbyn has narrowed the gap on May’s Conservatives. On the US data front, reports of interest include: April factory orders, the May ISM non-manufacturing (services) index, the Labor Department’s April job openings and labor turnover survey (JOLTS), and initial jobless claims.
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 12.31.2018 and includes leverage of $12.4bn. Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"), which includes Security Investors, LLC ("SI"), Guggenheim Funds Investment Advisors, LLC, ("GFIA") and Guggenheim Partners Investment Management ("GPIM") the investment advisers to the referenced funds. Securities offered through Guggenheim Funds Distributors, LLC, an affiliate of Guggenheim, SI, GFIA and GPIM.
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