Week of March 6, 2017
The highlights of the past week were speeches from President Trump and Fed Reserve policymakers. Donald Trump made infrastructure a key tenet in his first speech to Congress. Despite lacking specifics, the speech did not stop the market from breaking the psychological 21,000 for the Dow Jones Industrial Average and 2,400 for the S&P 500. Both indices were up last week, notching a 0.88% and 0.67% return, respectively.
Turning to the Federal Reserve, the members' hawkish tone pushed the probability of a rate hike in March from 36% to 80% as the market adjusted their expectations. On the data front, fourth quarter GDP missed expectations of 2.1% by coming in at 1.9%, but the impact was offset by better-than-expected inventory data and stronger consumer confidence. In Europe, French bonds got a boost from recent election polls which show candidates that are more friendly to the European Union pulling ahead. However, Britain’s political woes continue with the potential for a new Scottish independence referendum negatively impacting the British pound. What's more, the UK missed manufacturing expectations which now has investors speculating if this is the beginning of a slowdown in the sector. International benchmarks were ultimately mixed last week with China's Shanghai Composite down -1.46%, the MSCI Europe up 1.39% and Japan's Nikkei 225 Average down -0.93%.
What are we reading?
Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links:
As mentioned above, investors increased their expectations for a rate hike from the Federal Reserve during its mid-March meeting given the tone of recent policy maker discussions. We would note that recent economic data continues to suggest that the domestic economy is moving in the right direction with higher inflation and a healthy job market.
The British pound retreated last week as expectations of another Scottish referendum began making waves. The first vote held in 2014 had 55% of Scots electing to remain in the UK, however, a majority of them voted to remain in the European Union during the Brexit vote last year. Given this dynamic, the outcome of another referendum could be very different.
Crude inventories increased to all-time highs and, while the magnitude of the inventory increase for the week is not significant, at current levels further increases are perhaps unsustainable. Beside the inventory situation, poor compliance with production cuts in Russia also weighed on oil prices. The commodity largely remained range bound.
Fun Story of the Week
How much would you pay for a fine bottle of wine or single malt scotch? What about $50 or, perhaps, over $100 for a special occasion? But what about a bottle of water? Undoubtedly the price per bottle would be well below $10 and even that is probably too high. However, a Norwegian start-up is trying to change that perception by offering a luxury bottle of water at the incredible cost of $100 per bottle. The price tag may seem outlandish but the company is going to great lengths to bring this indulgence to the market. In fact, they are going out to the remote Norwegian fjords and bringing back chunks of icebergs near the North Pole, melting them and putting the contents in a bottle fit for champagne. According to those that have tried it, the water tastes "incredibly light" which is why the company is using the tagline, "The taste of snow and air". So, if you're looking for an interesting or eye-catching gift, the product can be found in a few luxury stores around the world but only in limited quantities as the company can only churn out 13,000 bottles at a time.
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This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
NIKKEI 225 AVERAGE INDEX
The Nikkei 225 Average Index is a Japanese index that tracks the top 225 companies listed on the Tokyo Stock Exchange. It includes the most liquid Japanese stocks listed in the first section of the Tokyo Stock Exchange. It is price-weighted and yen-denominated.
MSCI EUROPE INDEX
The MSCI Europe Index captures large- and mid-cap companies across 15 developed markets countries in Europe.
SHANGHAI COMPOSITE INDEX
The Shanghai Composite Index is a market index of all stocks (A shares and B shares) that are traded on the Shanghai Stock Exchange. It tracks the largest publicly traded companies in China.
Fox Business, March 2017. http://www.foxbusiness.com/features/2017/03/03/luxury-iceberg-water-at-100-pop.html