The week that was…
The market continues to act very well; after a big run up the week prior to this there was some consolidation needed and that is indeed what occurred. There was some temper tantrum knee jerk reaction to the WELL TELEGRAPHED rate hike Wednesday so that was a bit amusing but all in all, the major indexes went nowhere for the week which is exactly what bulls would like to see following a major spike. Some people wrung their hands about the idea that there will be “3 rate hikes” in 2017 (up from the previous forecast of wait for it…. 2). Let’s rewind a year ago … “they” were telling us there would be 4 rate hikes in 2016. Not so much. But this year we may have Trumpflation so we’ll see if 2017 actually brings follow through.
The Federal Reserve raised its key short-term rate on Wednesday, as had been universally expected, but it also forecast three rate increases in 2017, compared with the two that had been anticipated at its previous meeting in September. While the revised outlook could be taken as a positive sign—the Fed has said it would only raise rates when it deems the economy strong enough to withstand such a move—it added an element of uncertainty to the market. In raising rates, the Fed moved its key short-term rate to a range of 0.5%-0.75% from 0.25% to 0.5%. The Fed decision marks the central bank’s first increase in rates since last December, which itself was the first in about a decade.
“The view seems to be that Trump will deliver on his fiscal stimulus promise, the economy will expand sharply, inflation will rise, and the Fed will need to hike rates more than currently forecast, but not by enough to lead to a serious stock market selloff,” wrote Kathleen Brooks, research director at City Index.
The only major economic report of the week was retail sales which only rose 0.1% vs expectations of 0.3%.
While our main focus is U.S. equities it is worth noting Monday saw the largest plunge in the Chinese market since June as there was an apparent on stock purchases by insurance companies. The Chinese market had been on quite a run since late September.Continue reading