Week Ending 1/27/2017

It was a week for the record books as the Dow shot through the 20,000 barrier on Wednesday and closed at 20,094. Boeing jumped by 5.1% on strong earnings and that was enough to push the Dow through.

Overall, US equity markets were up about 1%, international +1.37%, bonds and the dollar were roughly flat and crude advanced by 1.43%

Surprisingly, the market has ignored what would seem like negative news. In the just the first week of the Trump presidency, he has gotten into a war of words with Mexico that might turn into a trade battle/war, there is talk of a 20% border tax/tariff, barred citizens from certain Muslim-majority countries from entering the country and dropped out of the Trans-Pacific Partnership, and those are just the headlines. But the market is staying focused on anticipated stronger growth ahead.

GDP

The first estimate from the Commerce Department on real GDP was +1.9% in Q4. Trump is looking to double the 1.9% rate. The 1.9% estimate is much lower than the GDPNow forecast of 2.90% but in line with the NY Fed’s Nowcast estimate of 2.10%.

For all of 2016, GDP was up 1.6%, that is the lowest number since 2011 and down from 2.6% in 2015. Q4 was highlighted by strong consumer spending, an increase in business investment, home construction and government spending. Net exports subtracted 1.7% from the growth rate.

The labor market remains tight. Jobless claims came in at 259k. The four-week average was $245.5k, the lowest number since November of 1973.