Market Update

Monday, December 18, 2017 | Eagle, Colorado

Last week finished very strong with the market anticipating a deal on the tax plan to be finished and delivered to President Trump before Christmas and the Federal Reserve Bank raising the Federal Funds Rate by 0.25%, as expected. Interest rates were largely lower on this news (and therefore bonds were up). The increase in the overnight lending rate that banks charge each other on overnight loans (the shortest possible term) reflects a positive economic outlook, overall. Indications are that economic activity has been improving and the labor market continues to strengthen despite hurricanes disruptions in the data. Inflation continues to stay stubbornly below the FED target of 2%.

The equity markets were up 4 out of 5 days with the Nasdaq lagging a bit before taking off on Friday. The Dow is now closing in on 25,000 as market participants head home for the holidays. Trading volumes should be relatively light for the next couple of weeks.

Last week was the first week of trading Bitcoin futures, which is a major milestone in the “cryptocurrency” gaining legitimacy as an asset class. The departing Fed Chair, Janet Yellen commented during her final press conference as Fed Chair, only that the cryptocurrency is a “highly speculative asset” and that the US Central Bank is not currently seriously considering a digital currency. The CME started trading its own futures contract last night.

In other news, the rules on net neutrality were repealed after a vote of 3-2 by the FCC. Upon the news of the vote, the NY State Attorney General Eric Schneiderman said he would “sue to stop the FCC’s illegal rollback of net neutrality.” As far as markets are concerned, companies in the business of providing access to the internet stand to benefit tremendously. Shares of CenturyLink (CTL) were up over 15% last week.

This week we will actually have some earnings reports. Notable companies set to provide updates are Lennar (LEN) a homebuilder, Carnival Cruise Lines (CCL), FedEx (FDX), Micron Technology (MU), General Mills (GIS), Nike (NKE), CarMax (KMX) and Paychex (PAYX).

Of special note, we will be keeping an eye on shares of H&R Block (HRB) and Intuit (INTU) to see how they react to any news on tax reform.

Overall, markets look very happy as we head into the holiday stretch. Most trading teams are operating with skeleton crews this week and next with attention turned toward 2018. It’s a time for review, reflection and planning.

Shane Fleury, RICP®

Chief Investment Officer