Performance for Week Ending 1/6/2017:
The Dow Jones Industrial Average (Dow) added 1.02%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) gained 1.67%, the Standard & Poor’s 500 Index (S&P 500) finished up1.70% and the Nasdaq Composite Index (NASDAQ) tacked on 2.56%. Sector performance was favorable with 10 of the 11 S&P sector groups finishing higher. The Healthcare (+2.93%) posted the best gains while Telecom (-1.16%) was the sole loser.
||Closing Price 1/6/2017
||Percentage Change for Week Ending 1/6/2017
||Year-to-Date Percentage Change Through 1/6/2017
*See below for Index Definitions
MARKET OBSERVATIONS: 1/2/17 – 1/6/17
Stocks kicked off the New Year on a positive note with all of the major indices finishing the week solidly higher. Gains were broad based with 10 of the 11 S&P sector groups finishing to the upside. While there was no notable catalyst to account for the weekly gain, it seems the performance was driven by a continuation of the post-election rally and the potential benefits of the new administration’s proposed policies.
Payroll Report: On Friday, the Labor Department reported that December nonfarm payrolls rose by 156K, below the 175K expected by economists. However, the prior month’s data was revised upward to 204K from the initial estimate of 178K. The unemployment rate rose to 4.7% (from 4.6%), in line with expectations. Average hourly earnings advanced by a better than expected 0.4% from a month earlier and 2.9% from a year ago. Overall the report was solid and the “not too hot, not too cold” nature of the data suggests the Fed will continue to move at a gradual pace.
Recent economic data has also been encouraging. Last week the Institute for Supply Management (ISM) reported that manufacturing activity expanded for a fourth consecutive month in December. The headline ISM Index rose to 54.7 (readings above 50 signal expansion) from 53.2, the fastest pace in two years. The “guts” of the report were also solid with the forward looking new orders component jumping to 60.2 from 53.0 in November. Elsewhere, the Census Bureau reported that US construction spending rose 0.9% in November, solidly above the 0.5% forecast by economists. Initial jobless claims during the week ended December 31 fell 28k to 235K, well below the 260K expected by economists and the lowest level in eight weeks. Jobless claims continue to hover near the lowest levels in almost 4-decades and have been below 300k for 96 consecutive weeks – a level typically associated with a healthy labor market.
FOMC Meeting Minutes: The minutes from the December FOMC meeting showed that Fed officials were focused on the impact of potential fiscal stimulus during their meeting, but most members reiterated that a “gradual” pace of rate hikes over the coming years would likely remain appropriate.
Bottom-line: The broader narrative surrounding domestic equities remains largely unchanged. Sentiment remains upbeat reflecting improving growth metrics and anticipation of Trump’s policies. However, stretched valuations and elevated political expectations could act as a near-term buffer. While it is very difficult to try and time a top in a momentum driven rally, a cooling off period may be needed in the near-term. If the markets were to pullback, the action would be viewed as corrective in nature and not the start of a longer-term downtrend.
The Week Ahead: Politics and policy will be the focal point during the coming week. On Wednesday U.S. President-elect Donald Trump plans to hold a “general news conference” in New York City, his first press conference since his election. On Thursday, Fed Chair Janet Yellen will host a town hall meeting with educators from across the country. Yellen will speak briefly about the mission and responsibilities of the Federal Reserve System and then respond to questions from participants.
Fourth-quarter earnings season will kick-off this week with some of the world’s largest banks (JPMorgan Chase, Bank of America, and Wells Fargo) scheduled to release results. In total, nine members of the S&P 500 are expected to report. On the data front, reports of interest include: the Labor Department’s November job openings and labor turnover survey (JOLTS), the December Producer Price Index (PPI), December retail sales, November business inventories and the University of Michigan’s January consumer sentiment survey.
The Fed speaking calendar will also be busy with several Federal Reserve officials scheduled to make public appearances. The speaker list includes Boston Fed president Rosengren, Atlanta president Dennis Lockhart, Chicago president Charles Evans, St. Louis president James Bullard and Philadelphia president Patrick Harker on Thursday and Friday.
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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