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Perspectives from Above the Noise -- Week of April 16th, 2018

| April 16, 2018
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U.S. stocks pared a weekly gain last Friday amid investor jitters ahead of a possible U.S-led military strike against Syria, following evidence of chemical weapons use by the Assad regime. Domestic equities had posted sharp gains earlier in the week, sparked by conciliatory comments by China’s President Xi Jinping at the Boao Forum for Asia, agreeing to lower trade tariffs and back free trade by pledging more market access to foreign investors. Xi’s comments helped unleash approximately $5.6B of cash inflows into mutual funds at the start of April, the fourth most in a decade, according to Bloomberg. Meanwhile, for the week, the Cboe Volatility Index declined by nearly 19%, reaching the lowest level in a month. Late Friday, President Trump addressed the nation saying that, in conjunction with Britain and France, he had ordered the U.S. military to launch precision strikes on targets associated with chemical weapons manufacturing of Syria’s dictator Bashar al-Assad.

For the week, the S&P 500 gained +2.04%, the Dow Industrials rose +1.79% and the MSCI EAFE (developed international) advanced +1.48%.

What We’re Reading

Oil at Three Year High -- CNN

Treasury Yields Rise -- CNBC

Chart of the Week:  Jobless Claims at Longest Record Under 300,000

Initial jobless claims declined by 9,000 last week, to 233,000. The streak of jobless claims below 300,000 reached a new record of 162 weeks, ahead of the previous record set in 1970 (161 weeks). The recent achievement is even more impressive, considering that population growth over the last 50 years has increased the U.S. workforce 60% above 1970 levels. Overall, labor data continues to remain healthy. The unemployment rate has held steady at a 17-year low of 4.1% for six consecutive months, and the economy is still adding jobs at a solid pace.

In March, jobs growth only increased by 103,000, but there is a lot of month-to-month volatility in this data series, and March's nonfarm payroll reading came on the heels of the highest reading since 2015 in February. The 3-month average of jobs growth is still solid at over 200,000 and the 12 month average is at an 8-month high of 188,000. There is still some slack in the labor market, but the U.S. economy is nearing full employment. Additionally, several inflation readings have picked up over the last few months. The minutes from the March Federal Open Market Committee (FOMC) meeting were released last week and all participants anticipate stronger growth and inflation "in coming months." We continue to project two additional rate hikes this year, but three more hikes is not out of the question if we see higher than expected inflation due to increased wages in the coming months.

Some materials are chosen by the Cetera Investment Management team and summarized by Jason Vitucci who is not affiliated or registered with Cetera. Cetera Investment Management provides investment management and advisory services to a number of programs sponsored by First Allied Securities and First Allied Advisory Services. Cetera Investment Management individuals who provide investment management services are not associated persons with any broker-dealer. International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.

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