Saturday, January 28, 2017

MAD Economic Review - 1/28/2016

Well I'm back full time!!! Recently returned from my honeymoon with my fantastic wife with some tan lines, great memories, and feeling refreshed!  Traveling really helps you understand the world economy as you get to see first hand globalization at work in multiple places. I've been blessed to be able to travel this world to locales Christopher Columbus, Amergio Vespucci, & Ferdinand Magellan only dreamed of visiting.  They all set out with slightly different goals, but in the end their main quest was to increase trade.   It goes even further back than the Silk Road. That's always been human civilizations goal - increased trade & prosperity.

This week I did another Investor's Corner segment on Topstep Traders Squawk Radio with Eddie Horn, which I've recently found out is also very talented at multiple instruments including the piano. This week I highlighted some of the effects big money players such as Soros and Buffet use their influence through the media & other means.  I highly suggest you check it out. It might show you they don't always have your best interest in mind when they spew out comments on TV or social media. For further reading check out my review of Gundlach & Gartman.

This week also saw the Dow eclipse the 20k mark.  While it sounds cool, in reality it's not much of a big deal.  As the index head's higher each new whole number becomes less important on a percentage basis.  For example to reach 25k the index only needs to advance another  25%. That sounds impressive, but when you consider the Dow was up 15% in 2016 you realize this can easily happen in the next year or two.

As a matter of fact every index hit a new high this week. The Nasdaq paced the pack with a 1.9% gain for the week. It seems the #TrumpRally is alive and well so far.  From my perch some charts are starting to look overbought so it might not be out of the question for the indexes to take a breather soon and consolidate some of these impressive gains.  That's just a natural progression for the market.

Index                  YTD % Change
Dow -                         1.7%
S&P 500 -                  2.5%
Nasdaq -                     5.2%
Russell 2000 -            1.0%

Visit to see more great charts.

Economic Reports

We had a handful of important economic published this week, all of which seemed to get lukewarm responses.  Housing data came in with Existing and New Home Sales.  Neither of which met expectations.

Existing Home Sales - 5.49 million vs 5.55 million expected
New Home Sales - 536k vs 589k expected.

I'd say the miss is partly influenced by the recent rise in mortgage rates. I'll be putting together my semi-annual real estate report in the next few weeks as the remainder of 2016 data gets published.

4th Quarter GDP estimates came out showing the economy grew at a 1.9% clip from October-December 2016. I wouldn't worry about this to much despite it being a weaker number than we'd like.  The market has already passed by that data point and is digesting Q4 earnings from large multi-nationals(34% of companies already reported).  This number will be revised a couple more times so take it with a grain of salt.

For the year I think participants will be more focused on the possibility of another Fed rate hike(currently pegged at 71% chances in June), inflation, and regulation changes coming down from DC with plenty of proposals to simplify the tax code and other compliance procedures.

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