For the week ending 12-8-17
Stocks ended the week mixed as, once again, the broad market indices like the Dow Jones and S&P 500 managed small gains while the NASDAQ Composite, which is heavily weighted toward technology and high growth companies, fell slightly. The stock market continues to focus on the winding path of the tax reform bill making its way through Congress. The House and Senate have each passed their own bills and a conference committee has been formed to reconcile the differences between the two. The Congressional leadership thinks they can resolve the differences in the two bills and have a vote on the final bill by December 20. If all goes according to plan, President Trump will have a bill to sign on his desk before Christmas.
A bill that cuts taxes on businesses and corporations by some $1 trillion over ten years will certainly be a tailwind for stocks and we expect the markets to respond positively when, as seems increasingly likely, the bill is signed into law. The tailwind of tax cuts comes on top of increasingly positive economic data both at home and abroad, but, with the broad market S&P 500 up 20 percent already this year, questions are being raised on Wall Street about how much of this tax cut bill is already priced into the market. Already we’ve seen price momentum slow down as the bill comes close to passage.
Even if traders have priced in the tax cut by now the stock market is still getting stimulus from strong economic data. The monthly jobs report was released on Friday and the number beat forecasts as 228,000 new jobs were created on estimates of 190,000. Both the unemployment rate and the participation rate were unchanged at 4.1 percent and 62.7 percent respectively. The report also saw outsized gains for manufacturing at 31,000, construction at 24,000, and professional services at 46,000, which are sectors that typically pay better than service sector jobs. Despite these gains, wage growth remains subdued. A drop in orders for commercial aircraft brought the headline factory orders report down, but underneath the headlines things look much better as core shipments were up 1.1 percent and nondurable goods orders were up 0.7 percent. The ISM services index declined in November but here again economists were quick to point out that the index had been abnormally high to begin with and that a decline from near-record highs was inevitable. Even with the decline, the index level still indicates a high rate of growth.
For the week, the Dow Jones rose 97 points to 24,329 (0.4 percent); the NASDAQ fell 8 points to 6,840 (-0.1 percent); and the S&P 500 added 10 points to 2,652 (0.4 percent)
Oil fell $1 to $57.00/bbl. Gold dropped $28 to $1,250/oz.
The yield on the 10-year Treasury was unchanged at 2.4 percent.
This weekly market commentary is written and produced in house by the investment team at Winch Financial. If you’d like more information about our investment strategies, or would like to attend a small group investment discussion, please call our office at 920-739-8577. We’re always glad to help.
Disclaimer: It is worth noting that the opinions in this commentary are Christian Peterson’s and may occasionally vary somewhat from the opinions of the Winch Financial investment team as a whole. Client recognizes that any opinions or analysis described in this commentary involve the Advisor’s judgment and good faith and do not constitute investment advice. All recommendations or observations are subject to various market, currency, economic, political and business risks. Client recognizes that no party to this alert has made any guarantee, either oral or written, that Client’s investment objectives will be achieved. Advisor shall not be liable for any action performed or omitted to be performed or for any errors of judgment or mistake, except in the case of Advisor’s gross negligence, willful misconduct, or violation of applicable law. Advisor shall not be responsible for any loss incurred by reason of any act or omission of Client, custodians, broker-dealers, or any other third party. Nothing in this commentary shall constitute a waiver or limitation of any rights that Client may have under applicable state or federal law, including without limitation the state and federal securities laws.