Your Weekly Update – Volatility Picks Up as Earnings Season Kicks Off

Weekly Performance

US: S&P 500 Index +.86%, Dow +1.04%, Nasdaq +1.04%
Europe: STOXX Europe 600 +0.60%, German DAX +1.43%, France CAC 40 +0.17%, U.K. FTSE 100 -1.00%
Asia: Japan Nikkei +0.65%, China Shanghai Composite +1.72%, Korea KOSPI  +0.95%
10-Year Treasury yield: +8 basis points to 2.63%, WTI crude oil -1.63%, COMEX gold -0.1%

It was a choppy holiday-shortened week for domestic equities. After a lull following passage of the tax reform bill, Washington reemerged on the market’s radar with tensions on Capitol Hill escalating throughout the week as Congress struggled to reach a funding agreement ahead of Friday’s budget deadline. Also, traders parsed key housing data that fell short of expectations (though remain near historical highs and were likely impacted by weather); as well as a string of generally upbeat earnings reports from major Wall Street banks, which marked the unofficial start of fourth quarter earnings season.

Looking abroad, in-line inflation readings out of Germany, the U.K., France, and the Eurozone buoyed markets in the region as investors weighed potential implications of a strengthening euro, which hit multi-year highs versus the dollar, on exports and the European Central Bank’s (ECB) bond-buying program due to its potential to suppress inflation. A series of economic data out of China, Europe’s largest trading partner, also provided support amid the U.S. budget impasse and political tensions around German Chancellor Merkel’s efforts to secure a coalition between the Social Democratic Party and her conservative party. The data out of China, which included gross domestic product (GDP), industrial production, retail sales, and fixed investment, were mostly better than expected and indicated that the government’s efforts to reign in debt levels while maintaining respectable economic growth rates were effective in 2017.

Next week, the U.S. docket contains additional housing data on new and existing home sales during the week, as well as Flash Purchasing Managers Index (PMI) data on Wednesday, Leading Economic Indicators on Thursday, and a series of tier one data on Friday that includes fourth quarter GDP, inflation, and durable goods orders. Overseas, PMI data is due out for the Eurozone, France and Germany, in addition to consumer confidence readings for the Eurozone and Germany, and U.K. employment figures. The calendar in Asia is relatively light with fourth quarter GDP due out in South Korea along with Japan’s trade balance, manufacturing PMI, and inflation figures. In addition, markets will be monitoring monetary policy announcements from the ECB and Bank of Japan.

 

Please see the methodology and assumptions used in GWP.

IMPORTANT: The projections or other information generated by GWP regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.

Investing involves risk, including possible loss of principal.

Indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average (DJIA) Index is comprised of U.S.-listed stocks of companies that produce other (nontransportation and nonutility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocks’ prices.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S.-based common stocks listed on the NASDAQ stock market. The index is market-value weighted. This means that each company’s security affects the index in proportion to its market value. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. It is not possible to invest directly in an index.

The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

The Deutscher Aktien Index (DAX) is a stock index that represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange.

The CAC 40 is a capitalization-weighted index of the 40 largest French equities designed to measure the overall performance of the Paris Bourse, the French stock exchange.

The FTSE 100 is an index of blue-chip stocks on the London Stock Exchange.

The Nikkei 225 Stock Average is a price-weighted index comprised of the top 225 blue-chip companies on the Tokyo Stock Exchange.

The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A shares and B shares listedon the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100. Index trade volume on Q is scaled down by a factor of 1000.

The Korea Composite Stock Price Index or KOSPI is the index of all common stocks traded on the Stock Market Division—previously, Korea Stock Exchange—of the Korea Exchange.

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments, and exports less imports that occur within a defined territory.

The Purchasing Managers’ Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.

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