Telemus Weekly Market Review

December 18 – December 22, 2017
It was more gains for the markets last week as the much anticipated tax bill was passed by Congress and signed by President Trump. The Dow Jones Industrial Average, the Nasdaq Composite, the S&P 500, the Russell 2000, and the S&P Midcap 400 Index all finished higher for the week, with gains ranging from 0.28% to 0.82%.

The stock market has been rallying in recent weeks in anticipation of the tax bill’s passage, so the somewhat subdued market gains in its wake were a testament to the notion that market participants have been inclined to buy the rumor of its passage. They didn’t necessarily sell the news, however either.

Last week’s gains were underpinned by sector rotation, which featured losses for the technology, health care, real estate, utilities, and consumer staples sectors, and gains for the financial, energy, materials, telecom services, industrials, and consumer discretionary sectors. In other words, there was relative strength in many of the cyclical sectors, which are expected to benefit from stronger economic activity. That strength was forged somewhat at the expense of the technology sector, which has been a leading standout all year, inviting concerns that it is over-owned and vulnerable to rebalancing efforts as 2017 ends.

Glad tidings pertaining to the expected pickup in economic growth finally availed themselves at the back end of the Treasury yield curve. The 10-year note yield jumped 14 basis points on the week to 2.49%, which is about even with where it started the year. In turn, the yield on the 2-yr note climbed seven basis points to 1.89% helping further to reverse the year long trend of a flattening yield curve which typically portends a slowdown in economic activity. A steepening yield curve is typically associated with a strengthening economy as stronger growth often invites higher inflation.

The growth outlook was bolstered this week by another batch of generally encouraging data, fueled by a series of impressive reports out of the housing sector. The NAHB Homebuilder Index hit its highest level in December since 1999; the pace of existing home sales in November was the strongest since December 2006; the pace of new home sales in November was the strongest since July 2007; and both housing starts and building permits in November were stronger than expected.

Not surprisingly, the iShares U.S. Home Construction ETF outperformed during the week, gaining 1.8%. On the flip side, the utilities and real estate sectors, which provide nice dividend yields, fared poorly as the jump in long-term rates challenged their appeal for income-oriented investors. The utilities sector, which is highly regulated, also got pinched by concerns that it won’t benefit much from the changes in the tax code. Fortunately for the broader market, the utilities sector has a very small weighting in the S&P 500, so its large losses were easily offset by the gains in the more heavily-weighted financial and energy sectors.

Generally speaking, then, the stock market is going into the Christmas holiday in good spirits, content to know that a tax cut is coming in 2018 and that Santa is coming on Monday.

Crude oil closed the week at $58.35 or about a 5% gain from where it started the year.

December 25 – December 29 Economic Calendar

  • Monday
  • Christmas Holiday
  • State Street Investor Confidence Index
    10:00 AM ET
  • Dallas Fed Mfg Survey
    10:30 AM ET

  • Consumer Confidence
    10:00 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • Farm Prices
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • Richmond Fed Manufacturing Index
    10:00 AM ET

  • State Street Investor Confidence Index
    10:00 AM ET
  • Dallas Fed Mfg Survey
    10:30 AM ET

  • Consumer Confidence
    10:00 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • Farm Prices
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • Redbook
    8:55 AM ET
  • S&P Corelogic Case-Shiller HPI
    9:00 AM ET
  • Consumer Confidence
    10:00 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • Farm Prices
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • International Trade in Goods
    8:30 AM ET
  • Jobless Claims
    8:30 AM ET

  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • EIA Petroleum Status Report
    11:00 AM ET
  • Farm Prices
    3:00 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • Chicago PMI
    9:45 AM ET

  • Baker-Hughes Rig Count
    1:00 PM ET
  • SIFMA Rec. Early Close 2:00 ET

  • Consumer Confidence
    10:00 AM ET
  • Pending Home Sales Index
    10:00 AM ET
  • Farm Prices
    3:00 PM 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.