Co-authored by Troy Tanzy
The first two trading days of the week were turbulent for the Dow Jones Industrial Average. It lost over 500 points off its highest point on Friday, the worst loss in over eight months. In tandem, the S&P 500 Index felt its largest percentage drop since August, according to The Wall Street Journal. This may have been a healthy drop for markets and a much-needed pause in the domestic-equity rally we have experienced so far in 2018. The down period was short-lived, however; the Dow opened nearly 250 points up on Wednesday morning, and the S&P was up 15 points pre-market. Other factors affecting market movements this week were President Trump’s first State of the Union address and the conclusion of the Federal Reserve’s two-day policy meeting on Wednesday.
President Trump remained optimistic about the economy and financial markets during his State of the Union address Tuesday evening. In his address, the president made mention of bipartisanship and a desire to work with Democrats on immigration reform, which includes determining a permanent plan for “Dreamers,” U.S. residents brought to the country as minors without legal status. In addition, President Trump discussed the threat of North Korea and announced he intended to keep Guantanamo Bay prison open. Among other legislation or milestones mentioned were tax reform and a repeal of a key Affordable Care Act requirement. The president also mentioned plans for an infrastructure program to “repair the nation’s roads, bridges and ports, relying on a blend of state and local government funding along with private investment that would add up to $1.5 trillion,” The Wall Street Journal reported on Wednesday morning. Overall, the address was optimistic and President Trump mentioned several times a desire to work with Democrats on accomplishing his goals.
The Federal Reserve is expected to allude to a March rate hike in its concluding statement following a two-day policy meeting on Wednesday afternoon. The market is forecasting a hike in March and at least one more hike later in the year. The Federal Reserve has a full plate for this meeting, as it will have to ensure forecasts include the Republican tax plan that was passed in December. This week’s meeting is also Federal Reserve Board Chair Janet Yellen’s last. Jerome Powell will take over in early February, according to MarketWatch.
Markets have a lot to dissect this week but appear on target with predictions, which should result in low turbulence moving forward.
Sectors: Among Sector Benchmark ETFs, the average momentum score decreased from 28.73 to 24.55. Energy decreased the most for the week, down 23 points. Cyclical sectors decreased, and defensive sectors increased slightly. Sensitive sectors decreased immensely, down by 34 points. Health Care led the move upward, up by 4 points over the week. Most of the rankings were generally negative for the week, implying an adverse appetite for risk.
Factors: For Factor Benchmark ETFs, the average momentum score decreased from 39.82 to 34.18. None of the factors increased for the week. High Beta decreased the most, down by 12. Both aggressive and defensive factors decreased for the week. Low Volatility, Dividend Growth, and Small Size ranked toward the bottom of the factors. All factors remained positive.
Global: Global Benchmark ETF momentum scores provided continued pessimism for the week. The average score decreased 42.45 to 38.73, with emerging countries leading the way. Latin America, the only gainer for the week, jumped 14 points. Japan went down the most, dropping 10 points. The Eurozone, Pacific, and Canada are at the bottom of the rankings. Both developed and emerging countries were down. However, all countries remained in the green.
Disclosure: No communication by Dynamic Performance Publishing or our employees to you should be deemed as personalized investment advice. Any investment recommended in this newsletter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Dynamic Performance Publishing, its affiliates, and clients may hold positions in the recommended securities. Results are not indicative of holdings for clients of Flexible Plan Investments. Forwarding, copying, or otherwise duplicating this information for the use by anyone other than the intended recipient is expressly forbidden. These results are not representative of those achieved by clients of Flexible Plan Investments, Ltd. (FPI) due to differences in security selection, timing of trades, transaction fees, and FPI’s management fees.