Last week saw the equity market hit new highs as economic optimism abounded after President Trump addressed a joint session of Congress. Continued expectations for significant fiscal stimulus and corporate-friendly tax policy have kept stocks well-bid since the election. With the S&P 500 Index up over 11% since the election and more than 6% since year-end, stocks have seen tremendous gains with very little pullback since November. It is now essential the administration and Congress deliver in market expectations.
Federal Reserve (Fed) Chair Janet Yellen drove another key news item last week when she indicated in her Friday speech that the Fed will increase interest rates in March. The only thing that seemingly could derail the hike is a weak February employment number, which I don't expect as the market is expecting an 180,000 increase in nonfarm payrolls. The expectation would be consistent with the average gains during the past six months. Unemployment claims made a 44-year low recently, which further supports the continued firm employment conditions.
I will be watching closely to see the push and pull of good economic data and a potentially more hawkish Fed over the next several weeks. In my opinion, the Fed's current monetary policy is accommodative and they will need to increase the pace of policy tightening if Washington is able to deliver on fiscal stimulus.
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.