The economic calendar is normal, but there will be a lot of competing news – Korean talks, China negotiations, and the Trump legal team's announcement about whether the President will meet with Special Counsel Mueller. And those are just the items we know about.
Sometimes there are great themes that do not get the deserved attention in financial media. Readers have encouraged me to identify and discuss such themes, and this week provides a good opportunity. Pundits should be asking: Which equity sectors benefit most from Trump policy changes?
Last Week Recap
In my last edition of WTWA I asked why stocks were “stuck in neutral” given the recent economic strength and the strong corporate earnings. I also noted the significance of the week's inflation data, even though the Fed's favorite gauge was not on the calendar. That was all quite accurate. It was the key topic at the start of the week, and stocks responded well to the tame inflation data released mid-week.
The Story in One Chart
I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, so check it out.
The market had a nice rally, up 2.4% for the week. The trading range was about 3.4%, consistent with recent volatility. I summarize actual and implied volatility each week in our Indicator Snapshot section below. As you can see, volatility has been moving lower, and is back into the long-term range.
The News
Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.
The overall picture remains positive. Economic strength is reasonable, and inflation is low. New Deal Democrat's analysis of high-frequency indicators shows some deterioration but retains the overall outlook.
The Good
The Bad