Telemus Weekly Market Review

December 11 – December 15, 2017

U.S. stocks climbed to new record highs last week as investors grew increasingly optimistic about the GOP’s chances of passing its promised tax overhaul and digested policy directives from several of the world’s most influential central banks. The S&P 500 added 0.92%, the Dow advanced 1.33%, and the Nasdaq jumped 1.41%. All three major indices settled Friday’s session at fresh record highs.

The Federal Open Market Committee voted to raise the fed funds target range by 25 basis points to 1.25%-1.50% on Wednesday, as expected. Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari–the FOMC’s two most dovish members–dissented, saying they preferred to keep the target range unchanged.

In addition, the Fed’s so-called “dot plot” revealed that the median FOMC member still anticipates three rate hikes in 2018 and two in 2019. Both figures were unchanged from the projections released in September, even though the central bank acknowledged that overall inflation and core inflation have declined this year and are running below 2.0%.

U.S. Treasuries rallied in a curve-flattening trade on Wednesday following the decision, while the U.S. Dollar Index moved sharply lower. The 10 year U.S. Treasury note closed Friday at 2.36% and the 2yr-10yr spread ended the week at 52 basis points, which is six basis points below the prior week’s closing level. The U.S. Dollar Index finished the week higher by 0.1% at 93.94.

Elsewhere, the European Central Bank decided to leave its key policy rate unchanged, as expected, and reiterated that it will reduce its monthly asset purchases to 30 billion euros (from 60 billion euros) starting in January and continuing through September 2018–or beyond, if necessary. The Bank of England also met this week, voting to leave its key rate at 0.50% and its asset purchase program at 435 billion pounds, as expected.

In Washington, House and Senate Republicans reportedly reached an agreement on a final version of their tax reform bill on Wednesday, but Senator Marco Rubio (R-FL) pushed for some last-minute changes, saying on Thursday that he would vote against the measure unless it further expands the child tax credit for lower-income households.

GOP leadership worked to appease Mr. Rubio and earned his support, as well as the support of Senator Bob Corker (R-TN), on Friday. With the two Senators on board, it appears that the Republicans have enough support to pass their tax reform bill.

On Wall Street, telecom shares within the S&P 500 jumped this week, underpinned by the prospect of tax reform and the Federal Communications Commission’s decision to roll back the “net neutrality” rules put in place by the Obama administration back in 2015. The rules required broadband providers to treat all internet traffic equally. In corporate news, Walt Disney agreed to purchase select assets from 21st Century Fox, including its film division and much of its TV operations, for $52.4 billion in stock. The two companies added 6.8% and 5.1%, respectively, helping the consumer discretionary sector finish ahead of the broader market.

Crude oil closed Friday at $57.26 in NYMEX trading, basically unchanged for the week.

December 18 – December 22 Economic Calendar

  • Monday
  • Housing Market Index
    10:00 AM ET
  • Current Account
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • Neel Kashkari Speaks
    1:10 PM ET
  • Corporate Profits
    8:30 AM ET
  • FHFA House Price Index
    9:00 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Leading Indicators
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • Housing Starts
    8:30 AM ET

  • Current Account
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • Neel Kashkari Speaks
    1:10 PM ET
  • Corporate Profits
    8:30 AM ET
  • FHFA House Price Index
    9:00 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Leading Indicators
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • Existing Home Sales
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Neel Kashkari Speaks
    1:10 PM ET
  • Corporate Profits
    8:30 AM ET
  • FHFA House Price Index
    9:00 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Leading Indicators
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • GDP
    8:30 AM ET

  • Jobless Claims
    8:30 AM ET
  • Philadelphia Fed Business Outlook Survey
    8:30 AM ET
  • Chicago Fed National Activity Index
    8:30 AM ET
  • Corporate Profits
    8:30 AM ET
  • FHFA House Price Index
    9:00 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Leading Indicators
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • Durable Goods Orders
    8:30 AM ET
  • Personal Income and Outlays
    8:30 AM ET
  • New Home Sales
    10:00 AM ET
  • Consumer Sentiment
    10:00 AM ET
  • Kansas City Fed Manufacturing Index
    11:00 AM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Leading Indicators
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. This market commentary is a matter of opinion and is for informational purposes only.  It is not intended as investment advice and does not address or account for individual investor circumstances.  Investment decisions should always be made based on the client’s specific financial needs, goals and objectives, time horizon and risk tolerance.  The statements contained herein are based solely upon the opinions of Telemus Capital, LLC.  All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable, but not guaranteed.