A sharp decline in the stock market means that the

Author: Destroer On: 04.06.2017

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The summer doldrums may have come early this year, with stocks quietly moving higher and volatility hovering near historic lows. Goldilocks appears to have arrived—low interest rates, improving earnings, a strong labor market, calm inflation, and still-accommodative monetary policy.

And in spite of stocks trading around record highs, sentiment remains relatively contained, with the Ned Davis Research NDR Daily Trading Composite remaining in neutral territory. As of June 6, Past performance is no guarantee of future results. But, as always, there are clouds on the horizon and pullbacks are possible at any time so it's important for investors to remain vigilant in keeping a diversified portfolio with appropriate risk exposure.

None appear to be imminent, but either of the latter two could appear suddenly. A little over a month in to the second quarter and it again looks like we're seeing a bounce back from a rough first quarter. Following an upwardly-revised 1. First quarter personal consumption expenditures were revised higher to a 0.

This has helped the "hard" data play a little catch up to the still-strong "soft" data; notably the still-healthy Confidence is aided by a strong labor market, despite the weaker-than-expected payroll increase ofannounced with the May Department of Labor report.

Adding to the Goldilocks economic scenario is contained inflation and still-subdued wage growth—average hourly earnings AHE are growing at a tepid 2. Other measures—like the Atlanta Fed's Wage Tracker—show higher rates of wage growth, which is worth watching. Why is Job Growth Slowing. Unfortunately, there is a darker side to this golden scenario. The unemployment rate is below what most economists believe is "full employment," also known as the non-accelerating inflation rate of unemployment NAIRUwhich is believed by a consensus of economists to be about 4.

Additionally, with the United States above full employment, it may be tough to get the economy to grow noticeably faster. It is becoming more apparent that the likelihood of any major fiscal stimulus in the form of a tax reform package or an infrastructure spending plan occurring this year is declining.

Republicans likely won't focus on taxes until health care reform is done; and with the Senate now promising to produce their own bill instead of following the one the House passed, further delays are possible. On a larger scale, the Democrat strategy currently appears to be much like the Republican one under the last administration—obstruction—meaning getting anything of substance passed is going to be difficult.

a sharp decline in the stock market means that the

We still believe that tax reform or simply tax cuts? Fortunately, neither analysts' corporate earnings estimates nor the Federal Reserve, have assumed any such action occurring.

This keeps earnings estimates in check, while how to find option value using jquery keep the Fed gradual in its approach to removing monetary policy accommodation.

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We believe the Fed will raise rates again on June 14, with the futures market pricing a hike at a near certainty. It is now expected that the Fed will begin the process of slowly reducing its bloated balance sheet by the end of this year, but that process and commentary surrounding it could be a source of elevated volatility in the months to come.

Another potential contributor to Goldilocks for companies and economies in the months ahead is the rising trend in global trade. The companies in the MSCI AC World Index get slightly more than half of their revenues from international trade.

Trade growth can have a meaningful impact on corporate revenue growth and, as a result, drive earnings and stock price performance.

Fortunately, global trade growth looks set for the highest pace in a decade, with the exception of the snapback in This is indicated by the export orders component of the Eurozone purchasing managers' index PMI ,which has done a good job of forecasting global trade growth in the months ahead, as you can see in the chart below.

Rising new a sharp decline in the stock market means that the orders indicate trade growth likely to continue to accelerate. This is important to keep in mind as the end of the month brings the end of the day trade review ordered by President Trump to identify trade abuses. The outcome of the trade study will likely focus on those countries which have goods trade surpluses with the United States. But it may also be the balance of trade, rather than just the size of the surplus, that drives the impact of the focus.

Despite the potential for worries over trade wars to resurface accompanying the outcome of the day trade review, the rising trend of improving trade growth means investors may want to consider favoring large cap stocks over small cap stocks. Larger companies tend to have more exposure to international trade as a percentage of their revenues than do smaller companies.

Goldilocks appears to be taking up residence on Wall Street, with modest growth, low inflation and a cautious Fed combining to make things "just right" for investors.

Additionally, the apparent improving global trade trend could help contribute to further stock market gains and support large-cap outperformance. International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets. Investing in emerging markets can accentuate these risks. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice.

The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is exchange rate rupee and euro from what are considered reliable sources.

However, its accuracy, completeness or reliability cannot be guaranteed. Diversification and rebalancing a portfolio cannot assure a profit or protect against a loss in any given market club penguin money maker 2010. Rebalancing may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events may be griffith livestock marketing centre that may affect your tax liability.

Forecasts contained herein are for illustrative purposes only, may be based upon proprietary research and are developed through analysis of historical public data. The Chicago Board of Exchange CBOE Volatility Index VIX is an index which provides a general indication on the expected level of implied volatility in the US market over the next 30 days.

The core PCE Price Index is personal consumption expenditures PCE prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. The Consumer Confidence Index is a survey by the Conference Board that measures how optimistic or pessimistic consumers are with respect to the economy in the near future.

The Atlanta Fed's Wage Growth Tracker is a measure of the wage growth of individuals. It is constructed using microdata from the Current Population Survey CPSand is the median percent change in the hourly wage of individuals observed 12 months apart.

MSCI AC World Index is market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. The MSCI ACWI is maintained by Morgan Stanley Capital International, and is comprised of stocks from both developed and emerging markets.

Markit Manufacturing Purchasing Managers Index PMI is an indicator of the economic health of the manufacturing sector. The PMI index includes the major indicators of: Any written feedback or comments collected on this page will not be published.

a sharp decline in the stock market means that the

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Find a branch Contact Us. Midweek Market Trend for June 14, Fed Raises Rates, Sticks With Plans for One More Hike This Year Are bonds signaling a major stock market peak? You can do this in two ways: Select your online service with one of these buttons. Copy the URL in the box below to your preferred feed reader.

Goldilocks…or the Three Bears? We continue to believe the bull market has legs, but investors should be aware that risks are elevated. The labor market is tight, which could limit economic and profits growth, but should help to support the consumer.

The Fed is likely to raise rates at the June meeting, but the market is looking for more clarity on the plans for the reduction of its balance sheet. Global trade has picked up, which could contribute to further stock market gains, with a likely bias toward larger companies.

Stocks remain near record highs. And volatility is near historic lows. FactSet, Chicago Board Options Exchange. Consumer confidence remains high. Bureau of Economic Analysis. MSCI All Country World Index components. Global trade volume from CPB Netherlands Bureau for Economic Policy Analysis Source: Please try again in a few minutes.

Important Disclosures International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.

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