What Will it Take for Investors to Believe the Fed?


U.S. equities returned to their winning ways last week after a one week hiatus. Although the gain was fractional, it nevertheless reflected the resiliency of this rally, especially considering the absence of market moving economic news, a Federal Reserve rate hike and the ongoing distractions of Washington. The S&P 500 gained less than 0.1 percent, but the index ended the week at 2344, just a touch below its record high of 2440, which it reached on Tuesday.

Uncertainty Lingers Following the U.K.’s Election


The fact that U.S. equities fell only slightly last week might be considered something of a victory. With a high-profile congressional testimony, elections in the U.K. and France, and a wobble in technology stocks to end the week, equities might have been expected to suffer a steeper bout of profit taking than just the few index points they did. But, as it turned out, the congressional testimony produced no smoking gun and resolved little in the ongoing Russia investigation. However, the technology heavy Nasdaq Composite was less fortunate than the broader averages, suffering a 1.6 percent decline on the heels of a sharp Friday selloff. Investors will be watching to see if the one-day downturn stabilizes, or is an indication of something more insidious in the very sector that has powered much of the broader market’s gains this year.

Could Slow Economic Growth Mean Good News for Markets?

If investors have put their expectations for meaningful policy support from Washington on indefinite hold, it seems that it matters little, as stocks climbed to another new high last week. The S&P 500 closed at 2439, and is now higher on the year by 9 percent. The index itself was higher by 1 percent for the week, but of the nine sectors that were up, only one rose less than the overall index. That was real estate, which still added 0.8 percent as measured by the RWR ETF.

What’s Behind the Eerie Calm in the Markets?

U.S. equities powered their way to another record high last week, as the S&P 500 climbed 1.4 percent to close at 2415.82. The index reversed two weeks of moderate losses and is now higher by 7.9 percent since the start of the year. At the sector level the advance was led by utilities, consumer staples and technology. In fact, the only sector that did not participate was energy, which fell 2.2 percent and is down 11.6 percent year-to-date. This came as crude oil fell by $0.87 cents a barrel, despite the formal extension of production cuts through March by OPEC and other producers, and despite energy stocks producing the strongest earnings growth in the first quarter. The Nasdaq Composite also joined the party, rising 2.1 percent, also closing at a new record high at 6210, now up on the year by 15.4 percent.

Investors Search for a Catalyst to Push Stocks Even Higher


Just two days after hitting a new record high last Monday, stocks hit an air pocket midweek on worries that the Trump administration would become crippled by developments in Washington. On Wednesday, the S&P 500 dropped 1.8 percent. It was the single worst day for the index in eight months. The dormant VIX index of implied volatility, which had become a focal point of investor complacency in recent weeks, surged 46 percent to 15.6. And the pullback in stocks was seen around the globe as the MSCI World index fell 1.2 percent. The yield on the ten-year Treasury note tumbled 11 basis points from 2.33 to 2.22 percent.