A Market Bounce Back – Will It Continue?

A Market Bounce Back – Will It Continue?

 

The market week ending Friday 2/16/2018 witnessed most major stock index averages rising over 4%. Certainly a significant move after a 10% correction the prior couple of weeks.

 

Two questions on many investors’ minds are:

  1. Is the correction truly over?
  2. Will the stock indexes form a W pattern where they move back up and then go back to test the recent lows?

 

As always, time will tell whether this correction will be short-lived or will the downside volatility continue. We continue to believe that interest rates and inflation data will play center stage for the foreseeable future.

 

Perhaps the 10 year US Treasury Note ending last week where it started @ 2.88%, had something to do with performance of the stock market last week.

 

Consumer Prices Rise – Is This a Concern?

 

Core Consumer prices were reported rising in January, .4%, month over month, which is the fastest pace in over 10 years. With the low level of inflation over the past several years, this is not yet a concern, however, worth keeping a close eye.

 

US Consumer Price Index (CPI) headline inflation rose 2.1% year over year. Over in the UK, the headline CPI was unchanged @ 3.0%.

 

Paul’s Take – Going Forward

 

This week brings light economic data so the market is likely to trade on remaining Corporate Earning Reports and how market participants decide to move or not move the level of current interest rates.

 

The recent US Tax Cut and spending bills will at least temporarily bring additional stimulus to our economy. Will this timing prove successful or will inflation be fostered in prematurely?

 

As volatility comes back into the securities markets, I am reminded that having an Asset Allocation Strategy that is suitable to your financial needs is imperative, especially for those approaching or currently retired.

 

 

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Paul Levin CFP®, ChFC®, RICP®

Retirement Income Certified Professional®