In the last full trading week of 2016, domestic markets were relatively quiet, with many people out of the office for the holidays. Nonetheless, all three major domestic indexes ended the week in positive territory. The S&P 500 was up 0.25%, the Dow gained 0.46%, and the NASDAQ added 0.47%. The Dow continued to flirt with surpassing the 20,000 mark for the first time - reaching within fewer than 13 points at its highest trading point on Wednesday, December 20 - before closing at 19,933.81 for the week.
Outside of the markets, we received a number of reports that painted a mostly positive view of the U.S. economy.
Good News
- GDP revised up again: For its final report on economic growth in the third quarter, the Commerce Department adjusted the GDP up for the second time - to a 3.5% annual rate. This analysis shows the fastest economic growth in two years.
- Consumer sentiment hits nearly 13-year high: The monthly index measuring consumers' views on the current and future state of the economy increased by 4.7 points to reach 98.2 for December. This reading is the highest since January 2004.
- New home sales beat expectations: Economists predicted that new home sales for November would increase by 2.1%, but last week's data showed the increase was in fact 5.2%. Consumers anticipating higher interest rates in the future could be contributing to the expectation-beating results.
Mixed News
- Personal incomes stayed flat: Despite economists' predictions that personal incomes would increase by 0.3% in November, the Bureau of Economic Analysis' data showed them flatten. Even with last month's stagnation, personal incomes are up 3.5% for the year.
Overall, even though last week was fairly slow for trading, we continue to see signs that the economy is improving - even if it is still far from perfect. We look forward to discovering what 2017 holds for investors and hope for more record highs and an economy that picks up speed as time goes on.
Quote of the Week
"To accomplish great things, we must not only act, but also dream; not only plan, but also believe."
--Anatole France, French poet, journalist, and novelist.
Golf Tip of the Week
Keep The Ball Rolling For Better Control
Instead of aiming for maximum distance and getting the ball close to the hole on your chips, try aiming for maximum roll. You have much more control over the golf ball when it's rolling versus when it's airborne. This is because you don't have to worry about things like where the ball will land, how much backspin it will have, and how the slope and lie of the green will affect its movement. To improve your control over the ball, practice hitting low chips that roll toward the hole instead of flying.
Financial Question of the Week
What steps should I take with my portfolio to adjust for inflation and higher interest rates?
Traditionally, standard inflation hedging investments have consisted of real estate, gold and other commodities. It may be time to consider another asset class to address your inflation concerns.
Equities, an asset class that is more typically thought of as something to avoid in times of rising inflation, may be a good choice as an inflation hedge. Believe it or not, corporate earnings have a good historical track record of keeping pace with inflation.
During periods of higher inflation, companies are able to raise the prices they charge faster than they were before -- in other words, they have greater pricing power.
As for rising interest rates, when 10-year Treasury yields are below 5%, rising rates have historically been associated with rising stock prices.
Ultimately, the best way to address threats of higher rates and inflation depends on your current situation, needs, and goals. Please contact my office if you or someone you know would like to discuss your concerns.
