Capital Market Implications for the Week of November 6 - 10, 2017
Last week’s most important economic release was the Producer Price Index, an inflation gauge. Increasing 2.4 percent year-over-year and excluding food and energy the gauge was slightly above expectations. Nonetheless, inflation in general remains subdued and thus currently does not present a threat to capital market valuations. Additionally, November’s University of Michigan Sentiment Survey was reported last week. Although consumer sentiment declined somewhat - from 100.7 in October to 97.8 in November - the present level still represents a 14-year high. As such, consumer confidence continues to reflect strength in the labor market and indicates the consumer feels secure in his or her job and job opportunities.
For the first time in eight weeks, stock markets both at home and abroad retreated last week. For the week overall, the S&P 500 Index sank -0.1 percent while the Dow Jones Industrial Index retreated -0.3 percent. The week’s best performing equity sector was real estate, which climbed 3.3 percent. The poorest performing sectors for the week were telecommunication and financials, which fell -1.3 percent and -2.6 percent, respectively. International stocks were mixed last week, as the MSCI EAFE Index declined -0.4 percent while emerging markets increased 0.2 percent. With the yield curve flattening to its lowest level in nearly a decade last week, bonds overall declined and high yield bonds suffered the most. For the week, the Barclays U.S. Aggregate Bond Index lost -0.4 percent, U.S. corporate bonds declined -0.7 percent and high yield bonds sank -0.8 percent. Some of the proposed tax law changes would likely limit the supply of tax-exempt bonds and thus only ten-year municipal bonds advanced last week.
Get the PDF