February Economic Update
Stocks once again advanced in January with the S&P 500 gaining 1.79% and the Dow Jones Industrial Average closing above 20,000 for the first time. As January ended, politics took center stage as investors focused on the controversy surrounding President Trump’s executive orders. The strength of the dollar stumbled amongst signals that the new administration might prefer a weaker currency. Consumer spending was high in December, but confidence plateaued towards the end of January with mediocre four quarter growth estimates. (1)
Domestic Economic Health
While markets fared well in 2016, the U.S. economy lagged in terms of relative annual growth. The Bureau of Economic Analysis reported GDP of only 1.9% for the entire year, which was the lowest since 2011. The U.S. has now experienced eleven consecutive years of economic growth of less than 3%. (2)
Consumer Confidence & Labor
Consumer spending was strong over the holiday season, with the Department of Commerce reporting personal spending rose by half of a percent, while incomes grew 0.3% in December. However, some analysts were underwhelmed by the DOL’s 2016 employment report, citing annual hiring growth was the lowest in five years. (3,4)
Real Estate Reports for 2016
The Census Bureau and the National Association of Realtors reported new and existing home sales retreated in December. For the year, new home sales rose an impressive 12.2%, but resales rose only 0.7% for 2016. Many prospective homeowners struggled to find suitable homes on the market as the year progressed. The NAR stated the total existing home inventory in December was the smallest in this century, with inventory contracting 6.3% in the past 12 months. The report cited the median sales price for an existing home was $232,200 in December. (5,6)
What Lies Ahead?
The post-election rally stumbled toward the end of January with politics and mixed economic data causing investors to baulk. However, the Dow Jones has once again climbed over the 20,000 mark as of this writing. November through April historically have trended bullish, although past performance is no guarantee of future results. If there is a waver in February, it may not foretell how the market will behave the rest of the year, or even in March. (7)
Citations:
1.) barchart.com/stocks/indices.php?view=performance [1/31/17]
2.) thestreet.com/story/13969585/1/stocks-mixed-after-u-s-gdp-shows-mediocre-end-to-2016.html [1/27/17]
3.) investing.com/economic-calendar/ [1/31/17]
4.) blogs.wsj.com/briefly/2017/01/06/december-jobs-report-the-numbers-3/ [1/6/17]
5.) usatoday.com/story/money/2017/01/26/new-home-sales-prices-mortgage-rates/97081430/ [1/26/17]
6.) inman.com/2017/01/31/decembers-numbers-hows-real-estate-market-looking/ [1/31/17]
7.) schaeffersresearch.com/content/bgs/2017/01/31/how-to-trade-the-tricky-month-of-february [1/31/17]
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
