Last Friday, all 3 major domestic indexes continued their streak of weekly gains and record highs. The S&P 500 added 0.15%, and the Dow was up 0.43%. Meanwhile, both indexes posted their 5th weekly gain in a row. In addition, the S&P 500 and Dow each hit intraday trading records on Friday. The NASDAQ also increased 0.24%, ending on a record high with a 3rd straight week of growth. International stocks in the MSCI EAFE rose as well, gaining 1.61% for the week.
What drove market performance last week?
We received a number of new reports last week, including data showing jumps in the Producer Price Index, Consumer Price Index, and Retail Sales. Recovery efforts from hurricanes contributed to the gains in all three of these readings. And they could continue to affect the markets for a while.
In addition to this new data, two key events contributed to the markets' continuing growth: 1) a positive start to earnings season and 2) high consumer sentiment numbers.
1. Earnings Season Started Strong
Companies have started releasing their 3rd quarter earnings reports, and so far, 87% of them beat bottom-line expectations. Corporate earnings have been strong since Q4 2016, and this quarter will likely continue that trend. However, the growth rate may not match what we have seen for the past few earnings seasons.
2. Consumer Sentiment Hit 13-Year High
After 8 years of economic growth, many consumers are feeling more content about their circumstances. The University of Michigan's consumer sentiment poll for September revealed that consumers held positive perspectives overall - across income, age, and political spectrums. Last month's reading has the highest consumer sentiment since 2004.
This year has certainly provided a variety of geopolitical drama to distract from the economic fundamentals. Nonetheless, in 2017, U.S. share prices have gained $3 trillion in value so far. At the same time, investors have taken $45 billion out of their ETFs and mutual funds - essentially missing this market rally.
Investors exit markets for myriad reasons. But when emotion drives choices, rather than true strategy, those decisions can have a lasting affect on long-term goals. If you have questions about how the markets are performing - or what choices you should be considering right now - we are always here to talk.
Tuesday: Industrial Production, Housing Market Index
Wednesday: Housing Starts
Thursday: Jobless Claims
Friday: Existing Home Sales
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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 indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P US Investment Grade Corporate Bond Index contains US- and foreign issued investment grade corporate bonds denominated in US dollars. The SPUSCIG launched on April 9, 2013. All information for an index prior to its launch date is back teased, 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.
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