As passive investing has become increasingly popular, the number of indices that track stocks has exploded. More portfolios are being built to track a wider range of exotic indices. But do investors really know what they’re getting?
January economic data are relatively unreliable, but recent figures paint a fairly consistent picture of where we are headed in the near term. While there is reason to be optimistic, it’s still a mixed bag, with some concerns about what we’ll see coming out of Washington over the next several months.
Real GDP rose at a 1.9% annual rate in the initial estimate for 4Q16, with the headline growth figure held down by a wider trade deficit. That does not mean that foreign trade is a drag on the U.S. economy.
It goes without saying that there is a sharp contrast between the economic views of the incoming administration and those of the Federal Reserve. President Trump, and most of the individuals who voted for him, sees a weak economy, devastated by job losses in manufacturing. The Federal Reserve sees an economy nearing full employment. So who’s correct?
Since the November election, the financial markets have priced in a more friendly business environment, with growth boosted by expansionary fiscal policy. However, the White House does not have absolute power.
Longer-term bond yields are near their highs for this cycle, while the environment for riskier assets like high-yield bonds, bank loans and stocks remains positive.
The December Employment Report showed the job market to be in good shape. The pace of job growth slowed in 2016, partly reflecting tighter labor market conditions.
The outlook for 2017 is now shaping up as a battle of ideas, though few seem to be realizing it yet. The stock market has risen since the election.
Federal Reserve policymakers are widely expected to raise short-term interest rates this week. The policy statement should continue to suggest that, while the pace of tightening is expected to be gradual, action will remain data-dependent.
The November job market report was a mixed bag. Nonfarm payrolls were in line with expectations, continuing to reflect a more moderate pace of job growth in 2016 (although still relatively strong).