Telemus Weekly Market Review

September 25 – September 29, 2017

Enchanted by the idea of a tax overhaul, investors pushed equities higher once again this week, sending the S&P 500, up 0.65%, the Nasdaq, up 1.07%, and the small-cap Russell 2000, up a whopping 2.76%, to new record highs. The Dow lagged this week, but still managed to eke out a modest gain 0.25%.

Technology stocks weighed on the broader market on Monday as investors engaged in a sector rotation trade that left the S&P 500’s technology sector lower by 1.4%. Technology names were weak from the jump, but selling accelerated following comments from North Korea’s foreign minister, who said that President Trump effectively declared war against North Korea in his U.N. speech last week and, therefore, Pyongyang has the right to take countermeasures against the U.S.–including shooting down U.S. strategic bombers, even if they’re not in North Korean airspace.

Investors turned their attention to Fed Chair Janet Yellen on Tuesday as she gave a speech entitled “Inflation, Uncertainty, and Monetary Policy” at the NABE’s annual meeting. She defended a gradual path of rate hikes despite continued uncertainty in the area of inflation, but her comments didn’t move the financial markets; equities finished the session flat.

Things turned around for the equity market on Wednesday as investors cheered the GOP’s tax reform outline, sending equities into positive territory for the week. Some of the most notable highlights of the plan include cutting the corporate tax rate to 20% from 35%, doubling the standard deduction, and reducing the number of tax brackets to three from seven. The plan calls for trimming the highest tax rate to 35.0% from 39.6%, but Congress will have the option to add a fourth bracket for the very top earners.

Details on how the government will make up for the immediate loss in tax revenue were limited. This topic will likely be an area of contention for the GOP going forward as many conservatives are opposed to the idea of driving up the federal deficit, which would probably be necessary to fund the tax overhaul–at least in the short term.

Market-moving headlines were scarce on Thursday, but that didn’t prevent the S&P 500 from ticking up and registering a new record close. Roku opened for trading on the Nasdaq exchange on Thursday and had a solid first day, settling 67.9% above its IPO price of $14.00 per share.

Investors pushed stocks higher once again on Friday after the core PCE Price Index – the Fed’s preferred gauge for inflation – for August came in below expectations, showing a month-over-month increase of 0.1%. On a year-over-year basis, the core PCE Price Index is up 1.3%, down from 1.4% in the prior reading, and still a ways below the Fed’s target of 2.0%.

Still, the fed funds futures market projects that the next rate hike will occur at the December FOMC meeting with an implied probability of 77.9%, up from 72.8% last week. The 10 year U.S. Treasury closed Friday at 2.33%, its highest level since early July.

Crude oil closed at $51.64 on Friday, a gain of almost 2% for the week.

October 2 – October 7 Economic Calendar

  • Monday
  • PMI Manufacturing Index
    9:45 AM ET
  • ISM Mfg Index
    10:00 AM ET
  • Construction Spending
    10:00 AM ET
  • Robert Kaplan Speaks
    2:00 PM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • James Bullard Speaks
    3:00 PM ET
  • Janet Yellen Speaks
    3:15 PM ET
  • Factory Orders
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Esther George Speaks
    4:30 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Tuesday
  • Gallup US ECI
    8:30 AM ET

  • Jerome Powell Speaks
    8:30 AM ET

  • Redbook
    8:55 AM ET

  • Robert Kaplan Speaks
    2:00 PM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • James Bullard Speaks
    3:00 PM ET
  • Janet Yellen Speaks
    3:15 PM ET
  • Factory Orders
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Esther George Speaks
    4:30 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • ADP Employment Report
    8:15 AM ET
  • PMI Services Index
    9:45 AM ET

  • ISM Non-Mfg Index
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • James Bullard Speaks
    3:00 PM ET
  • Janet Yellen Speaks
    3:15 PM ET
  • Factory Orders
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Esther George Speaks
    4:30 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Thursday
  • Challenger Job-Cut Report
    7:30 AM ET

  • International Trade
    8:30 AM ET
  • Jobless Claims
    8:30 AM ET
  • Jerome Powell Speaks
    9:10 AM ET
  • John Williams Speaks
    9:15 AM ET
  • Patrick Harker Speaks
    9:30 AM ET
  • Bloomberg Consumer Comfort Index
    9:45 AM ET
  • Factory Orders
    10:00 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Esther George Speaks
    4:30 PM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
  • Friday
  • Employment Situation
    8:30 AM ET

  • Raphael Bostic Speaks
    9:15 AM ET

  • Wholesale Trade
    10:00 AM ET
  • Eric Rosengren speaks on Saturday
    11:45 AM ET
  • William Dudley Speaks
    12:15 PM ET
  • Robert Kaplan Speaks
    12:45 PM ET
  • Baker-Hughes Rig Count
    1:00 PM ET
  • James Bullard Speaks
    1:50 PM ET
  • Consumer Credit
    3:00 PM ET
  • Esther George Speaks
    4:30 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.