The Week Ahead – Tug of War

Investments & Economy The Week Ahead Grow

The Week Ahead – Tug of War

Andrew Chan, CAIA, Co-Chief Investment Officer

| 1/29/18 8:02 AM

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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.

2.3%. The U.S. economy’s growth rate for all of 2017. Many were hopeful for a 3.0% reading for the fourth quarter of 2017, however it came in at a still-solid 2.6% on the backs of consumer spending and a large rebound in home construction. Compared to 2016 when the domestic economy grow at 1.5%, 2017 was a nice rebound. However, 2017 was right in line with the average economic growth we’ve seen since the Great Recession, an average of 2.2%.

The tug of war between bulls and bears since the Great Recession has been constant and investors’ psyches have definitely been scarred. Double dip fears. Oil fears. Volatility fears. Liquidity fears. Fed hike fears. Looking back at annual returns for the S&P 500 going back to 1988, it shows just how hard it is to time the market. As painful as the Great Recession was, it was over relatively quick compared to the Tech Wreck of 2000-2002. Tech was the high flying sector in 2017 and many expect it to correct significantly at some point as valuations get stretched. Tech Wreck 2.0? Maybe not – what’s different this time is that many tech companies have actual earnings (Tesla aside) and are seeing positive earnings revisions combined with multiple expansion.

S&P 500 Annual Total Returns:
SP returns.png

We’ve got a busy week ahead of us with an inflation reading, an FOMC meeting, a manufacturing update, and the latest employment report. The unemployment rate has held steady over the last three months at 4.1%, and many expect for it to break 4% sometime in 2018 as the economy continues to improve.

Data deck for January 27- February 2:

Date	Indicator	Period
January 29	PCE Reports	December
January 29	Personal Income	December
January 30	S&P Case Shiller Home Price Index	November
January 30	FOMC Meeting	----
January 31	ADP Employment Report	January
January 31	Chicago Purchasing Managers Index	January
January 31	Pending Home Sales	December
January 31	FOMC Meeting Announcement	----
February 1	Initial Jobless Claims	----
February 1	PMI Manufacturing Index	January
February 2	Employment Report	January

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Andrew Chan, CAIA, Co-Chief Investment Officer

About the Author

Andrew Chan, CAIA, Co-Chief Investment Officer

Mr. Chan co-leads the strategic investment committee and is responsible for overseeing First Foundation Advisor’s investment solutions platform which includes conducting investment manager research for both traditional and alternative investments as well as asset allocation guidance for portfolio construction. As a member of the investment committee, he provides market commentary and investment insights to clients. Additionally, Mr. Chan serves as a senior executive on the business strategy committee providing guidance on firm wide initiatives. With over 15 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 national 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 has previously served as an exam working group member and as an exam grader for CAIA. A member of the CAIA SoCal Executive Board since 2015, Mr. Chan has served as executive chapter head since 2017. Read more