The Week Ahead – Siren’s Song

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.

In Homer’s classic, The Odyssey, the Sirens were beautiful nymphs of the sea who would lure sailors with their singing. Once spellbound by the Siren’s Song, the sailors were led to shipwreck their vessels, and ultimately their doom. Leonardo da Vinci once wrote of the Sirens, “The siren sings so sweetly that she lulls the mariners to sleep”. With 71 record closes in the 2017, the Dow Jones Industrial Average set a new calendar year record for most record closes in a year. Yet for all the record setting by domestic equity markets, the 10-year U.S. Treasury yield closed 2017 at 2.40% which was actually lower than the prior year’s close of 2.45%.

The Siren’s Song has been strong as investors have continued to invest heavily in this momentum market and particularly in the technology sector. A similar craze is also occurring within cryptocurrencies. Odysseus was able to avoid the Siren’s Song of demise by having all of his sailors plug their ears with beeswax and then tie him to the mast. While beeswax may not be helpful this time around, diligence and a thoughtful diversified portfolio can minimize the fate of those tempted by the Siren’s song. This week investors will be watching the Fed Minutes carefully as well as the employment rate to see if more weight should be given to March as the first rate hike of 2018.

Data deck for December 30 – January 5: