As we look back on markets last week, we see mixed results, with none of the major domestic indexes gaining or losing more than 1%.1 The S&P 500 was down 0.10% for the week, and the Dow gave back 0.39%, once again failing to reach 20,000.2 On the other hand, the NASDAQ increased by 0.96% and reached its sixth record close in 2017 on Friday—pushed by a 1.36% rally for Facebook after Raymond James upgraded its stock.3 International stocks in the MSCI EAFE added 0.82%.4
Big banks reported earnings
Earnings season is upon us. On Friday, we saw JPMorgan Chase, Bank of America, and PNC Financial beat profit expectations.5 These positive results add some weight to the post-election financials rally, where financial-sector equities in the S&P 500 have added 17% since the election.6 A number of other banks will report this week, and we will look to see if their performance also matches the growth we have seen so far.
Retail sales grew
The December monthly retail sales report showed a 0.6% increase, slightly below the 0.7% consensus expectations.7 With this growth, retail sales are now up 4.1% in the past year.8 However, not all retailers are performing well. General merchandise stores are suffering as consumers continue to shop online and move away from in-person retail stores.9
Consumer sentiment was high but divided
The University of Michigan’s monthly report on consumer sentiment was 98.1, just below predictions but still near highs we have not seen since 2004.10 One interesting finding in the report is a strong partisan divide in consumer confidence. Richard Curtin, director of the consumer survey, described “extreme differences” between people’s expectations for whether new political policies would help or hurt the economy.11 He reminded people that the most impact on consumer sentiment will come from “actual changes in the economy” as a result of Trump’s work, which we will have to wait a few months to see.12
Earnings season continues
The markets will be watching earnings closely during this four-day trading week—especially to see if other major financial institutions also beat expectations. Some analysts believe that to keep the current market rally going and demonstrate that there is weight behind the post-election growth, we’ll need to see excellent reports from most companies.13
Donald Trump becomes President
While earnings reports will be important to track, another event looms larger in many people’s minds: Donald Trump’s inauguration. After he takes the oath of office Friday morning and becomes President of the United States, we will begin to see how the market’s expectations for Trump’s policies match reality.
From trade to taxes to infrastructure and beyond, the next few months will give us a number of insights into how U.S. policies may change. Uncertainty remains, and we will watch for political developments that may affect the markets. In addition, we will continue to focus on the fundamentals that provide deep insight into how the economy is performing—and how we can strive to keep you on track toward your goals.
I was on WPIX recently, discussing paying off holiday debt:
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