The Week Ahead – New Kids on the Block

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

Congrats to Patrick Reed for winning his first major at the Masters Tournament! What an amazing finish as he held off Rickie Fowler and Jordan Spieth to capture his first green jacket. And boy have the Los Angeles Angels of Anaheim found a new dual-threat stud, rookie Shohei Ohtani! As a pitcher he’s now 2-0 and, during his off days, he’s the designated hitter. Oh, and he’s crushed three homeruns so far in only 18 at-bats! 

Another new kid on the block (maybe not so new having gone through this for a quarter already!) for 2018 has been volatility. In 2017, the S&P 500 had a total of 4x days where it declined 1% or more. The first quarter of 2018? 13x. Looking at the total days with +/- 1% moves for the first quarter, the S&P 500 had 23 days with that kind of volatility versus the historical average of 13. As the second quarter begins, investors will be pondering many questions: will China and the U.S. have a full blown trade war (note that President Trump just called China’s President Xi a friend, sending domestic equity futures up Sunday night), was the first quarter of 2018 the start of the next tech wreck, will the Fed be able to continue to walk the fine line of raising rates, will the synchronized global recovery that we’ve seen the last year continue; and many more questions! All we can do as to continue to look at the data points as they come and, in-between those data points, keep an eye out for Shohei Ohtani.                                         

In the week ahead we’ll have an inflation reading and the release of the March FOMC minutes. For the FOMC minutes, expect a generally positive view on the economy and continued debate around inflation. With the next FOMC meeting three weeks away, the market is looking out to the June meeting as the potential next rate hike date. Currently the market is pricing in less than a 2% chance for May’s meeting and a 79% chance for a rate hike in June.

Data deck for April  7 – April 13: