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Perspectives from Above the Noise -- Week of December 4th, 2017

| December 04, 2017
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U.S. stocks finished lower last Friday; the S&P 500 and Dow Industrials opened on a high note, but then soured as political developments overshadowed positive tax news. Investors were worried that former National Security Advisor Michael Flynn’s admission to lying to the FBI regarding contacts with Russian officials may destabilize the administration and increase regulatory uncertainty. Meanwhile, Republican leaders in the U.S. Senate announced that, after a day of deliberations, they had the votes needed to pass their version of a tax reform. This, in turn, trimmed some of the day’s earlier losses and, overall, the week ended with substantial equity gains fueled by the increased likelihood of a corporate rate cut. Prior to this, the major U.S. equity indices closed at new record highs on Thursday. Internationally, the STOXX Europe 600 Index lost ground on Friday and ended the week in the red, the Shanghai Composite and Hong Kong’s Hang Seng indexes also were trending lower later in the week. Japan’s Nikkei broke the trend, rising on Friday and for the week.

For the week, the S&P 500 added +1.60% and the Dow Industrials rallied by +3.00%, while the MSCI EAFE (developed international) lost -0.94%.

What We’re Reading

No Brexit Breakthrough -- Bloomberg

Mortgage Fraud in China -- Reuters

Chart of the Week: Industrial Production Continues to Improve

Industrial Production and Capacity Utilization is measured monthly by the United States Federal Reserve, and is based on hours worked by industrial-sector employees. It offers percentage changes from month to month and year to year, and a breakdown of production by industry grouping.

The most recent reading came in 2.9% higher on a year-over-year basis, continuing an improving trend which has taken hold since the beginning of the year. This level of growth is higher than we have observed 64% of the time for the past 20 years. On a month-to-month basis, production grew by 0.9%, but we should note that while this is a strong result, October results were boosted by recovering activity after Septembers’ hurricane season. Without the impact of hurricane recovery, activity would have improved by 0.3% for the month. In our view, while there may be a decline in the short-term production trend next month, the data still indicates a solid and improving level of activity.

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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