Last Week In Markets: Jan 23 -27, 2017

Fisher Investments recaps the biggest market, economic and political news from last week, including US, European and Japanese economic releases.

Global equities ended 1.2% higher amid strong economic data and political wrangling.

The new Trump Administration dominated the media. As always, our political commentary is non-partisan, focused solely on assessing policies’ potential impact on stocks. President Trump made headlines by signing several executive orders and memos on healthcare, trade, immigration and other policy areas. However, like most executive orders, they amount to little—mostly stirring sound and fury. Major, lasting change requires legislation, yet congressional Republicans oppose many of President Trump’s proposals. We expect intraparty gridlock to block, stall or heavily dilute most initiatives—preventing the new administration from accomplishing as much as many envision. Markets, which dislike legislative uncertainty, should benefit from the continued political morass.

US data showed continued economic strength, but were mixed compared with expectations. IHS Markit’s preliminary January manufacturing and services Purchasing Manager Indexes (PMIs) exceeded expectations at 55.1. The Conference Board’s December Leading Economic Index (LEI) rose 0.5% m/m, led by a modestly steep yield spread and rising stock prices. Q4 GDP missed expectations, rising 1.9% annualized, yet the private sector components improved. The largest detractor was strong imports, which subtract from GDP but represent healthy domestic demand. Similarly, falling exports were mostly tied to soybean exports normalizing after surging temporarily in Q3 due to poor harvests in South America. December existing and new home sales decelerated to 5,490,000 and 536,000 as supply tightened. December core capital goods orders grew 0.8% m/m, beating expectations.

Non-US data were light this week. UK Q4 GDP met expectations, rising 2.4% annualized on strong retail, hotel and restaurant spending. In the eurozone, IHS Markit’s January composite PMI hit 54.3, narrowly missing forecasts, while M3 money supply beat expectations at 5.0% y/y. Japanese December import and export growth both accelerated.

The Week Ahead:

Most countries release January manufacturing and service surveys. The US reports November home prices, December personal income and spending and January employment. The eurozone posts Q4 GDP, January CPI and December retail sales. The Fed and the Bank of England release interest rate decisions.

Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses a Luxembourg tax basis. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.

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