Weekly Economic Update – January 9, 2017

WEEKLY QUOTE

“One must know oneself, if this does not serve to discover truth, it at least serves as a rule of life and there is nothing better.” – Blaise Pascal

WEEKLY TIP

Child care costs for working parents can be steep. Fortunately, some employee benefit plans offer dependent care flexible spending accounts. Parents can pay for qualified child care expenses and get a tax break at the same time by using these FSAs, which can be funded with pre-tax dollars.

WEEKLY RIDDLE

It lacks fingers, yet it points. It lacks feet, yet it constantly runs. It lacks arms, yet it may periodically strike. What is it?

Last week’s riddle:

Kylie tells her friend Danielle that she knows of a place where Valentine’s Day comes after the Fourth of July. Where is this place?

Last week’s answer:

In the dictionary.

RISING WAGES, MODERATE HIRING IN DECEMBER

The Department of Labor’s latest employment report shows the average hourly wage at $26.00 last month, up 2.9% in a year. That is the largest annualized wage increase seen since June 2009. Payrolls expanded by 156,000 additional hires in December, leaving total 2016 job growth at a 5-year low of 2.2 million. (This could be a sign of the labor market reaching full employment.) The headline jobless rate ticked up to 4.7%, while the U-6 rate encompassing the underemployed was at 9.2%.1

MANUFACTURING ACTIVITY PICKED UP AS 2016 ENDED

Investors liked what they saw in the Institute for Supply Management’s December purchasing manager indices. ISM’s manufacturing PMI rose 1.5 points to 54.7, its best reading in two years. The Institute’s service sector PMI held steady at an impressive 57.2 last month.2,3

FED OUTLOOK: CAUTIOUSLY OPTIMISTIC

Minutes from the December Federal Reserve policy meeting noted that Federal Open Market Committee members were reasonably confident about the economy for 2017, while citing some “uncertainty about the timing, size and composition” of future policy moves. In other words, the Fed may or may not ultimately follow through on its 2017 forecast of three interest rate hikes. FOMC members saw “only a modest risk” of a “sharp acceleration in prices” this year.4

DOW ENDS WEEK AT 19,964

The blue chips hit an intraday high of 19,999.63 Friday on the way to a 1.02% weekly advance to 19,963.80. As the Dow flirted with history, the S&P 500 and Nasdaq made history, respectively closing at record peaks of 2,276.98 and 5,521.06. The S&P gained 1.70% for the week; the Nasdaq, 2.56%. Dropping 19.37% in five days, the CBOE VIX “fear index” finished the trading week at 11.32.5,6

THIS WEEK: On Monday, Acuity Brands, Alcoa, and WD-40 report Q4 results. Nothing significant is scheduled on Tuesday. KB Home and SuperValu announce earnings Wednesday. Thursday, the latest initial jobless claims report appears, Federal Reserve chair Janet Yellen addresses teachers at a Washington, D.C. town hall meeting, and Delta Air Lines shares Q4 results. The week’s major news items all arrive Friday – investors will consider the December retail sales report from the Census Bureau, December’s Producer Price Index, the initial January University of Michigan consumer sentiment index, and earnings reports from Bank of America, BlackRock, JPMorgan Chase, PNC, and Wells Fargo.

% CHANGE
Y-T-D
1-YR CHG
5-YR AVG
10-YR AVG
DJIA
+1.02
+18.08
+12.30
+6.10
NASDAQ
+2.56
+14.17
+21.29
+12.68
S&P 500
+1.70
+14.41
+15.64
+6.15
REAL YIELD
1/6 RATE
1 YR AGO
5 YRS AGO
10 YRS AGO
10 YR TIPS
0.46%
0.65%
-0.11%
2.38%

Sources: wsj.com, bigcharts.com, treasury.gov – 1/6/176,7,8,9

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

Best regards,

Greg R. Solis, AIF®
President and CEO

Bob Medler, CRPC, CMFC, AIF®
Wealth Advisor / Investment Analyst

78-075 Main Street
Suite 204
La Quinta, CA 92253
Office: (760) 771-3339
Fax: (760) 771-3181

www.soliswealth.com
E-Mail: greg.solis@lpl.com
E-Mail: robert.medler@lpl.com
CA Insurance License #0795867

The Wealth Advisors of Solis Wealth Management are also Registered Representatives with and securities and advisory services are offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. 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. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 – blogs.wsj.com/briefly/2017/01/06/december-jobs-report-the-numbers-3/ [1/6/17]
2 – tradingeconomics.com/united-states/business-confidence [1/4/17]
3 – tradingeconomics.com/united-states/non-manufacturing-pmi [1/5/17]
4 – nytimes.com/2017/01/04/business/economy/federal-reserve-minutes-interest-rates.html [1/4/17]
5 – cnbc.com/2017/01/06/us-markets.html [1/6/17]
6 – markets.wsj.com/us [1/6/17]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F6%2F16&x=0&y=0 [1/6/17]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F6%2F16&x=0&y=0 [1/6/17]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F6%2F16&x=0&y=0 [1/6/17]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F6%2F12&x=0&y=0 [1/6/17]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F6%2F12&x=0&y=0 [1/6/17]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F6%2F12&x=0&y=0 [1/6/17]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F5%2F07&x=0&y=0 [1/6/17]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F5%2F07&x=0&y=0 [1/6/17]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F5%2F07&x=0&y=0 [1/6/17]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/6/17]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/6/17]