Week in Review
It was a relatively quiet week in capital markets. Trading volume was very low, and the S&P 500 was down 1 percent. Interest rates were also down for the week with the 10-year U.S. Treasury finishing the week at 2.44 percent.
Baby What a Big Surprise
2016 was the year of surprises. In sports, the Chicago Cubs won the world Series and the Cleveland Cavaliers won the NBA Championship, ending decades-long curses in both cities. But sports weren’t the only bastion of surprises as slow growth around the world gave rise to populism and nationalism in national elections and referendums.
To us, the biggest surprise is not that pollsters wrongly predicted political outcomes or that people voted for change. In our opinion, the biggest surprise has been the exuberance shown by the markets and nearly all sentiment indicators since the election.
We look at several economic indicators each day, and none are more ethereal than confidence indicators. The United States is almost seven years into this economic expansion, but confidence indicators never recovered to prior cycle highs, until now. Whether you look at CEO confidence, small business confidence or consumer confidence all have rebounded since November 8 to near-or-at cycle highs. This would have been hard to predict even a few months ago, which is precisely what makes surprises, surprises.
Takeaways for the Week:
· Stock and bond markets were both relatively quiet in the final week of trading for 2016
· Both consumers and the stock market are expecting positive change in 2017