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Weekly Economic Update

January 26, 2018

The Economy

  • Preliminary readings of Markit’s January purchasing managers’ index (PMI) pointed to mildly accelerating growth. Services came in below expectations, due to weak output; manufacturing hit a three-year high, on export sales, production and employment.

  • Durable-goods orders jumped by 2.9% in December, reaching a six-month high. Strength in orders for civilian aircraft and aviation parts mitigated weakness in nondefense capital goods, pointing to expanding business investment.

  • Initial jobless claims grew by a smaller-than-expected 17,000 to 233,000 in the week ending January 20, as labor market conditions continued to tighten. The less volatile four-week moving average dipped by 3,500 to 240,000. Continuing claims fell by 28,000 to 1.92 million in the week ending January 13.

  • Existing-home sales unexpectedly pivoted lower by 3.6% in December to an annualized rate of 5.57 million, as tight supply and increasing prices sidelined many potential buyers.

  • December new-home sales fell by 9.3% to an annualized rate of 625,000, as a recent boost from hurricane-related rebuilding dissipated; the total figure remained strong by historical standards, the fourth-highest in a decade.

  • The Conference Board’s index of leading economic indicators recorded a better-than-expected 0.6% gain in August, its twelfth straight monthly increase. The reading, used by economists to gauge the health of the U.S. economy, pointed to continued economic acceleration and strength.

  • Mortgage-purchase applications jumped 6% higher in the week ending January 19, driven by a combination of accelerating strength in the housing market and a recent trend of slowly rising rates. Refinancing activity (which is sensitive to even small rate changes) climbed by 1% in the same period.

  • The European Central Bank (ECB) left interest rates unchanged in January and reaffirmed that its asset-purchase program would remain at €30 billion per month through at least September 2018 (or longer, if necessary). ECB President Mario Draghi emphasized the need for rates to remain steady in the near-term as inflation continues to undershoot the central bank’s target.

  • The U.K. economy is estimated to have expanded by 0.5% during the fourth quarter and by 1.5% year over year, despite areas of Brexit-related weakness. Industrial production and service-sector output gained, while construction fell.

  • In another sign of Japan’s continued economic recovery, The Bank of Japan maintained its short-term interest-rate target and government-bond purchase rate.

U.S. Economic Calendar

  • January 29: Personal Income and Outlays

  • January 30: S&P Corelogic Case-Shiller HPI

  • January 31: Mortgage Applications

  • February 1: Jobless Claims, Productivity and Costs, PMI Manufacturing, Construction Spending

  • February 2: Employment Situation, Consumer Sentiment

 

Stocks

  • Global equities were up this week. Emerging markets led developed markets.
  • U.S. equity sector performance was positive across the board. Healthcare and telecommunications led, and industrials and consumer staples finished last. Growth stocks had the edge over value stocks and large-company stocks beat small-company stocks.

 

Bonds

  • Global bond markets moved higher this week. Global government bonds outperformed, followed by corporate bonds; high-yield bonds lagged.
  • Treasury yields rose as the week’s economic data did little to change investor expectations for an increase in rates by the Federal Reserve in March.

 

 

Disclaimer:

This information is not meant as a guide to investing, or as a source of specific investment recommendations, and Gibraltar Private Bank & Trust makes no implied or express recommendations concerning the manner in which any client’s accounts should or would be handled, as appropriate investment decisions depend upon the client’s investment objectives. The information is general in nature and is not intended to be, and should not be construed as, legal or tax advice. In addition, the information is subject to change and, although based upon information that Gibraltar Private Bank & Trust considers reliable, is not guaranteed as to accuracy or completeness. Gibraltar Private Bank & Trust makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information.

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Disclosures:

 

Index returns are for illustrative purposes only and do not represent actual fund performance.

Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

This material is provided by SEI Investments Management Corporation (SIMC) for educational purposes only and is not meant to be investment advice. The reader should consult with his/her financial advisor for more information. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. There are risks involved with investing, including possible loss of principal. SIMC is a wholly owned subsidiary of SEI Investments Company.

 

 

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