Investments & Economy The Week Ahead

The Week Ahead – Rip Van Winkle

Welcome to “The Week Ahead” where each Friday we take a moment to provide our thoughts on what we can expect in markets and the economy for the upcoming week.

Many of you may be familiar with the story of Rip Van Winkle, written by author Washington Irving. The story tells of a man who wanders into the Catskill Mountains, falls asleep, and wakes up decades later to find that the world has changed dramatically.

 

If old Rip Van Winkle took a nap right after the U.S. Presidential election last year and woke up today, he would think not much has changed if he looked solely at “safety assets.” Gold prices back on November 9th, 2016 were $1,278 and the 10-year U.S. Treasury was at 2.07%. Flash forward to this morning and gold is back above $1,350 and the 10-year U.S. Treasury is at 2.05%. Over the last few weeks we’ve seen central bankers positon for tighter interest rate policies, increased saber-rattling between nuclear-capable countries, and devastating natural disasters. While “safety assets,” such as gold and U.S. treasuries, are reflecting those fears, risk assets as a whole have continued to stubbornly move upward. The volatility and fear index, the VIX, is currently at 12, still below its long-term average of 15. Historically, 3-5% of selloffs in the S&P 500 have occurred on average every 2-3 months. The current rally has now gone 10 months without a 3% sell-off, the third longest since World War II. The two other times? 1993 (11 months) and 1995 (12 months).

 

Expect global macro events to continue to drive markets over the next two weeks until the FOMC meeting, where expectations of the normalization program will be announced. As noted in our most recent thought leadership piece, Thinking the Unthinkable, we continue to prefer to have some dry powder on-hand to take advantage of volatility when it returns.

 

Data deck for September 9 – September 15:

Date

Indicator

Period

September 13

Producer Prices (PPI)

August

September 13

Federal Budget Balance

August

September 14

Consumer Prices (CPI)

August

September 14

Initial Jobless Claims

----

September 15

Empire Manufacturing Index

September

September 15

Retail Sales

August

September 15

Capacity Utilization

August

September 15

Manufacturing Production

August

September 15

Industrial Production

August

September 15

Business Inventories

August

September 15

U. of Michigan Consumer Sentiment

September

 

 

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Andrew Chan, CAIA, Portfolio Strategist
About the Author
Andrew Chan, CAIA, Portfolio Strategist
Mr. Chan serves on the investment team and is responsible for conducting investment manager research and portfolio construction. As a member of the investment committee, he provides market commentary and investment insights. Mr. Chan’s responsibilities include overseeing client portfolios, calculating risk metrics, conducting the rebalancing of client portfolios, and evaluating the selection of new investment managers. With over 10 years of wealth management experience, Mr. Chan has played key roles across various aspects of investment and wealth management. Prior to joining First Foundation Advisors, Mr. Chan was most recently a portfolio manager at U.S. Trust where, in addition to his daily responsibilities, he served on numerous internal committees including the investment manager committee, the portfolio model committee, and the strategic technology committee. He also served on the in-house strategic consultant committee reporting directly to the President of U.S. Trust. Mr. Chan is a graduate of the Wharton School Executive Program on Investment Management and holds a Bachelor of Arts degree in Business Administration from the University of California, Riverside. He is a Chartered Alternative Investment Analyst (CAIA). Mr. Chan serves on the executive board for CAIA Los Angeles and is the Interim President for the association. Read more