Weekly Market Update (January 15 – January 19, 2018)

January 22, 2018

American equity market finished the shorted trading week with small gains. The S&P 500 recorded one of its best one-day advances on Wednesday, since November of 2017. Investors watched as the Dow Jones Industrial Average once again passed a new record milestone; breaching the 26,000 mark for the first time in history. Friday ended the second week of the closely scrutinized New Year’s earning season, with banks and financials posting mixed results – Goldman Sachs took a hit after releasing below expectation results, while Morgan Stanley performed much better than analysts expected. Trump’s new tax reform policy is seeing many companies getting hit with a one-time fee associated with the legislation, potentially hurting earnings releases. Apple helped market gains, after announced it would repatriate most of its offshore cash back into USD – with speculators believing that this will boost future dividends. The U.S Government officially shutdown Saturday morning, furloughing any nonessential personnel. This was following Congress failing to pass a new bill to continue funding certain government activities; which was due on Friday at Midnight. After an agreement between the two parties was not met, the government went into an official shutdown until a funding agreement is reached. The USD treaded lower, and treasure yields increased following the news.

Canadian markets posted modest gains over the week – lagging behind the gains of most other developed countries. Canada’s market growth was one of the slowest this week, mirroring a similar performance in 2017. Resistance in the markets were primarily due to decreases in the energy and material sectors, following NAFTA uncertainties and retreating oil prices. Health care stocks helped boost market gains once again – with medical marijuana companies posting strong gains, after a very volatile week. The Bank of Canada announced Wednesday it would raise interest rates, marking the third rate hike since July 2017. The target rate was set to rise 0.25 points to 1.25%; the highest it’s been since 2008.

A stronger Euro, and easing inflationary data led EU markets to end the week higher. The Eurozone’s CPI for Dec came out to 1.4% – while the core CPI stayed higher than expected at 0.9%. Europe’s STOXX 600 gained 0.5% for the week, closing at around 400. Equity markets in Japan continued to grow, with the Nikkei gaining 154 points (0.65%) closing at 23,808 – resulting in a 4.6% growth YTD. Economists believe the Bank of Japan may change interest rates, while a majority still believe no movements will occur. China’s GDP experienced the fastest growth for the first time in seven years, growing 6.8% in Q4 2017 – annualized to 6.9% in 2017.

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