The US stock markets exhibited strong gains last week as the Dow (+2.0%), NASDAQ (+3.1%) and S&P 500 (+2.8%) were all up nicely, and with the Dow and S&P 500 continuing to set new record highs. Taxable bonds were up about 0.1% - 0.2%, while tax-free municipal bonds continued their rally, gaining about 0.5% for the week. Unfortunately, small cap stocks fell about 0.5% for the week, which seems counterintuitive, given the upward trend of the entire market. Monday was the big day, as the markets reacted to the favorable monthly jobs report released the prior Friday, but when the stock markets were closed. Further, the 10-year Treasury yields took a break from their recent rises, which helped spur the value of bonds across the board. In short, it’s usually a good week when BOTH stocks AND bonds have a strong rally.
Investors’ eyes will begin to turn their attention to corporate earnings reports, as this week will mark the begin of quarterly earnings season. According to Factset, this set of quarterly earnings are expected to increase by a whopping 24%, which is remarkable. Earnings season is typically kicked off with earnings from big banks, and the financial and consumer discretionary sectors are expected to provide the biggest gains. Of course, it can be amazing how fickle the markets can be, as I’ve seen terrific earnings reports only to be met with surprising losses by the very same stocks. In that case, it’s usually because their earnings or forecasts are less stellar than investors had hoped. I’m not implying this WILL happen, but that I’ve been around this block long enough to know that it COULD happen. I guess we soon shall see. Regardless, we feel pretty good about the direction the economy is moving.
Have a great day and week!