Another week of Trump shock and awe political news finished on a strong note driven by a de-regulation rally in the financial sector on Friday. Major indices closed the week near all-time highs. Many question marks surfaced this week about just how much the GOP is going to back DJT policy initiatives. The stock market may be forced to price in some more complicated political realities of the pro-growth policy initiatives that had fueled the rally.

Your Weekly Anecdotes:

  • DJT signed an executive order on Friday compelling the DOL Secretary to evaluate the ‘DOL Fiduciary Rule’ along with the power to rescind or revise the regulation which was set to take effect on April 10th 2017.
  • The FOMC, BOJ, and BOE all met this week and surprised no one by keeping their respective policies unchanged. The revised Fed statement did acknowledge firming inflation data but remained status quo on ‘moderate’ economic activity, solid job market, but soft business spending. Both BOJ and BOE upgrade their growth forecasts to 1.4% and 1.6% respectively.
  • Increased anti-European political risk, improved growth, and rising inflation have called into question the staying power of ECB bond buying program. This has resulted in a dramatic move up in interest rates, sending Euro region bonds to their worst January on record.
  • To feed those of you looking for a nice DJT-Russia conspiracy theory anecdote – Russia is the top performing global stock market since the DJT election, up 22.4%. The S&P 500 is up 7.3%.
  • The year-end rally in the USD has turned south thus far in 2017, largely on DJT attempts to talk down the dollar. DXY is off 2.6% after rallying 4.5% post-election. Technology and materials stocks have the highest percentage of international revenues and are leading the market thus far in 2017. Ultimately, growth and interest rates will determine the course for the USD.
  • Bullish stock market sentiment has cooled off; now back to levels seen in August and September of 2016. AAII bullish (32%), neutral (33%), bearish (34%) are very evenly distributed, perhaps explaining the sideways stock market since mid-December.
  • Institutional stock market sentiment has been consistently more bullish than individuals consistently over the past 10 years and the ‘skew’ currently sits at a high point over that time period.

Your Weekly Economic Updates:

  • The January jobs report was the strongest in four months with employers adding 227,000 jobs, beating expectations for 180,000. New entrants into the labor market pushed the unemployment rate up 0.1% to 4.8%.
  • January jobs report also reported soft wage gains with average hourly earnings only increasing 0.1% and December was revised downward. This provided some calm to market observers concerned about recent trends in wage inflation.
  • ISM manufacturing survey posted a very strong reading of 56. Manufacturing metric has turned sharply higher over the prior year. The Prices Paid component of the report shot up to 69, the highest reading since May 2011 – something the Fed surely noticed.
  • Consumer confidence continues to jump higher. January jumped to 111.8, nearly 20 points above the long term average of 93.6.