January 15, 2018 – Weekly Market Commentary


Tablet Price Chart - Market Commentary

Akin Oyedele – Business Insider
There’s Been a Fundamental Shift in how Investors View the Stock Market Rally

Summary: Recent shifts in options trading trends suggests that investors are betting the market will continue to rally well into 2018. The skew index, which measures the demand for options which gain value as the market rises versus those that gain value as the market falls, plummeted to its lowest level since Q3. This implies that traders are expecting the bull market to continue. 


UK Flag - Market Commentary

Alex Morales and Stefania Spezzati – Bloomberg
No Deal Brexit Could Cost 482,000 Jobs

Summary: Leaving the European Union without a Brexit deal could cost Britain nearly half a million jobs. The region could also see around a $68 billion decline in business investment over the next 10 years. Prime Minister Theresa May has struggled to gain substantial ground for the UK in Brexit talks which continue to be delayed. 


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Sara Potter – Factset
Labor Shortages Are Not Translating Into Higher Wages

Summary: With the unemployment rate near a 17-year low, companies have had a harder time finding qualified workers. Low unemployment and a decline in qualified labor should lead to wage growth, but wage increases have been lagging during the current economic recovery. Weak growth could be due to the fact that temporary service jobs have led employment growth in recent years. As inflation begins to gain traction wages will be an important data point for policymakers and businesses in 2018. 


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John Gittelsohn and Charles Stein – Bloomberg Markets
Gundlach Says S&P 500 Will Have Negative Return for 2018

Summary: Jeffrey Gundlach, CEO and founder of DoubleLine Capital Management, said that the S&P 500 will end the year with a negative return. According to Gundlach, because all recession indicators are negative the markets have already priced in expected 2018 returns which will lead to a significant pullback in the index later this year. 


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Natasha Turak – CNBC
Bond Guru Bill Gross Signals a New Era for Treasury Markets

Summary: Bill Gross called the end to a 25-year bond market last week. Gross pointed out that long-term trends in 5-year and 10-year Treasuries have shifted which is a sign that yields have a higher probability of surging higher rather than falling below historically low levels. Bond prices fall as yields rise and increase as yields fall. 


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Liz Ann Sonders, Jeffrey Kleintop, Brad Sorensen – Charles Schwab
Party Like its 2017!

Summary: A great stock market start to 2018 has been driven by the expectation that the economy will continue to grow at a solid clip and that tax reform will boost earnings. The Schwab team cautions investors who are eager to jump head-on into the markets. Investor sentiment, typically a contrarian indicator, has risen to an all-time high, and the positive effects of fiscal reforms may already be priced into the market. Underlying fundamentals are still strong, but investors should prepare for more volatility as the bull market continues to age. 





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