As 2016 comes to a close, the final week of the year is expected to be a quiet one for investors and traders.
Stocks have been extremely bullish since Trump won the White House, largely based on hopes that anticipated fiscal policy changes with deregulation, lower taxes, and infrastructure spending will help to spark the U.S. economy.
Since Trump won the U.S. presidential election on November 8th, the Dow is up 9 percent, the S&P added 6 percent, and the Nasdaq has increased over 5 percent.
2016 Was A Good Year For Stocks
Overall 2016 has been a good year for stocks with the S&P 500 up 13 percent year to date ending December 23rd, the Dow rising 14 percent, and the Nasdaq gaining 9 percent.
The Dow has seen 7 consecutive weekly gains and is close to reaching 20,000 which would mark a historic record. The Dow is currently at 19,933.
Stocks are now more expensive with all of those large gains and some value oriented investors are still waiting for a correction to hit the market before investing in the stock market.
In a macro environment with a strong U.S. dollar and the Fed Reserve projecting 3 more interest rate hikes next year with the federal funds rising to 1.4 percent in 2017 based on median projections from Fed members, well above its current range from .50-.75 percent, some investors are looking for less risky investments to park their strong returns in 2016.
Several European countries in the European Union will hold elections in 2017 which has the potential to bring some added volatility in the market later in the year.
The Week Ahead
The markets are closed in the U.S. and Europe on Monday December 26th in observance of Christmas.
On December 27th consumer confidence for December and the Case Shiller 20 city index for October will come into view and show housing market data across large metropolitan areas in the U.S.
Last week, housing data was better than expected with both November existing home and new home sales and on Thursday it was the reported that the Fed’s preferred inflation gauge core PCE, excluding food and energy, rose to 1.65 percent in November but still remains below the Fed’s 2 percent target.
The Bureau of Economic Analysis also reported last Thursday that 2016 Q3 GDP reached 3.5 percent in its 3rd estimate.
This comingWednesday December 28th pending home sales for November will be reported and on Friday Chicago PMI data for December will come into focus.