While stocks were little changed for the week, a look back at the first quarter shows a different story. The Dow Jones Industrial Average rose 4.6%, the S&P 500 Index moved ahead 5.5% and the NASDAQ surged nearly 10%, its best quarter since 2013. Early gains were a follow-through on the so-called Trump rally that began after the election, but other economic factors weighed in, too.
- Housing starts and new home sales exceeded expectations, despite a 3.7% drop in February sales of existing properties. The small setback was mostly driven by the low supply of single-family homes for sale, rather than slowing demand.
- New orders for manufactured durable goods increased modestly in February and shipments of these products, up three of the last four months, gained ground. Industrial output was also strong.
- Consumer confidence was upbeat and unemployment and inflation remained under control.
- And finally, GDP closed at a 2.1% rate for the final quarter of 2016 and appears to be on track for a 2%-2.5% gain for 2017.
Not all is rosy, however, looking out to the next quarter or so. The new administration may run into more roadblocks with Congress in moving ahead with initiatives such as tax, trade and infrastructure after failing to get its repeal of the Affordable Care Act. Stocks are not cheap at current levels and much of the good news has been priced in. As mentioned in previous weeks, the transports have been lagging, which is not a healthy sign, although the group was ahead by 2% this week. Crude oil moved higher after bouncing off a $48/bbl. bottom and closed at $$50.60 on Friday with energy stocks climbing by over 2.5%; the market’s best sector. Nonetheless, oil prices have not made a strong move up of late, as was expected with a growing economy.
The market’s ability to hold its own in the face of unsettling news is encouraging, but one wonders how long such resilience will last given the high valuations now in place. While caution is prudent in the short-run, a long-term stance should serve investors well.
Here is the answer to last week’s trivia question: The iconic board game “Monopoly” was first introduced in the mid-1930’s by Parker Brothers. Today, the game is owned by? Mattel, Fisher-Price, Selchow & Righter or Hasbro. Answer: Hasbro. Hasbro purchased Parker Brothers, then owned byTonka, in 1991.
Today’s Trivia Question: Bond guru Bill Gross recently settled a breach-of-contract dispute with PIMCO, the company he co-founded in 1971. Gross now runs a similar fund to the PIMCO Total Return Fund he once managed for which new company? Janus Funds, Dreyfus/Bank of New York Mellon, Vanguard Group or Putnam Investments.