by Timothy D. Carkin, CAIA, CMT
Senior Vice President
Markets Set New Highs
The election is over and the capital markets have had a few weeks to digest the results. In this holiday-shortened week the equity markets coasted to new record highs on light volumes with the Dow Jones Industrial Average surpassing 19,000 and the S&P 500 eclipsing 2,200. Small Cap stocks continued their post-election rally, up nearly 13 percent since the election. The rallies’ theme is cyclical at heat, with financials, industrials, materials and energy leading the way. Along those lines, the U.S. dollar broke out to 14-year highs on Wednesday. The bond markets have taken a different tact post-election. The 10-year U.S. Treasury rate ticked up another few basis points this week settling in at 2.37 percent, yields up nearly 0.60 percent in November.
A Time to be Thankful
To many, Thanksgiving is a time for introspection. This week the economic calendar gave us three chances to reflect on our current economic state. On the positive side, durable orders came in well ahead of expectations, a sign that business investment may be improving. Weekly initial jobless claims came in slightly above expectations, something that isn’t that unexpected with our jobless rate near historic lows. New home sales disappointed and many are uncertain as to what effect the recent rise in mortgage rates will have. With seemingly constant negative news being played up in the media, we can be thankful the U.S. economy is still trudging along.
Black Friday
We are already seeing signs of a good holiday season as more people turn to shopping online. The Adobe Digital Index, which tracks online sales traffic, shows that Thanksgiving Day sales surged 14 percent year-over-year and is estimated to increase 11 percent Friday. If that holds true, more than $8.4 billion in online sales could occur through Cyber Monday. The trend toward virtual shopping is expected to take its toll on traditional brick and mortar stores with foot traffic estimated to fall by 3.5 percent, the third yearly fall in a row. It is too early to tell if this holiday weekend will put all retailers “in the black,” but we can see that the consumer is doing their part to grow the economy.
Takeaways for the Week:
· We are thankful that U.S. equity markets have rallied this year
· Even with the rise in rates, bonds are still positive on the year