Market Update: Wednesday, April 18, 2018

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Daily Insights

  • Market breadth appears to be in favor of the bull. As we laid out in our recent Weekly Market Commentary, there are signs that the 2018 bottom for U.S. equities has already taken place. Further building on that theme is overall market breadth, which continues to be quite strong. We like to look at advance/decline (A/D) lines to gauge overall market strength, as this shows how many stocks are going up versus down. In healthy markets, we want to see higher trending A/D lines as a sign of underlying market strength. Yesterday saw new all-time highs on the S&P Small Cap A/D line, the S&P Mid Cap A/D line, NYSE Common Stock Only A/D/ line, the OEX A/D line, and the S&P 500 Index A/D line. This broad-based market strength further supports higher equity prices in 2018.

  • Beige Book due out later today. The Federal Reserve’s (Fed) Beige Book will be released later this afternoon and will provide information on current economic conditions based on the 12 Fed districts via interviews with businesses, economists, and market experts. It will be the foundation for economic discussion at the upcoming Fed meeting that kicks off in early May. The general consensus is that the economy continues to improve, but inflation will likely be a key discussion point. (Fun fact: This report was initially called the Beige Book because when it was first used it had a beige color; after all of these years–the name has stuck.)

  • Eurozone inflation. While inflation in the United States is picking up, as we discussed in our recent Weekly Economic Commentary, European data released earlier today showed an easing of prices. U.K. inflation fell unexpectedly to 2.5% year over year in February, the lowest level in a year; while Eurozone inflation, at 1.3% in March, fell short of both consensus estimates and the prior month (both were 1.4%). The disappointing inflation numbers will likely push back European Central Bank’s ambitions to taper stimulus in September of this year.

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