Market Perspective for December 29, 2017

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Market Perspective for December 29, 2017

Equities gave up the Santa Claus rally in the last day of trading. The Dow Jones Industrial Average was the best performing index this week with a 0.14-percent decline. The Nasdaq fell 0.81 percent after slower-than-expected iPhone sales. Apple (AAPL) is by far the largest component in the Nasdaq. The Nasdaq finished the year with a gain of 28.24 percent, however, leading index performance. The Dow Industrials and S&P 500 both rallied more than 20 percent (including dividends), while the Russell 2000 increased 14.40 percent.

Technology led 2017’s sector performance by a wide margin. SPDR Technology (XLK) advanced 33.90 percent on the year. Healthcare, industrials, financials, and consumer discretionary clustered together with returns ranging from 22 to 24 percent. Materials outperformed the market with a gain of 24.01 percent. Utilities and consumer staples saw solid returns of 11.90 and 12.98 percent. iShares U.S. Telecommunications (IYT) fell 11.86 percent and SPDR Energy (XLE) slipped 1.06 percent.

Global X Argentina (ARGT) returned more than 50 percent in 2017, iShares MSCI Hong Kong (EWH) and Turkey (TUR) returned nearly 40 percent. International shares peaked around May for developed markets and September for emerging markets. iShares MSCI Emerging Markets (EEM) climbed 37.00 percent in 2017 and iShares MSCI EAFE (EFA) rose 24.90 percent. Since the start of June, however, SPDR S&P 500 (SPY) has outperformed EFA by 3 percentage points.

The U.S. Dollar Index lost a little more than 1 percent in the final four trading days. The euro cracked $1.20 after flash German inflation for December came in higher than anticipated. The 10-year Treasury yield finished at 2.41 percent. It spent most of the year between 2.2 and 2.5 percent. West Texas Intermediate crude closed above $60, a level it hasn’t sustained since 2015. Gold rallied past $1300 and copper rallied past $3.30 before dipping on the last day of trading.

Economic data was light this week. Consumer confidence cooled in December, according to the Conference Board’s survey. Despite the small dip this month, 2017 was the best year for consumer confidence since 2000. The Atlanta Federal Reserve’s GDP Now Model ended the year with a fourth-quarter growth forecast of 2.8 percent, in line with the economist consensus.

The economy grew at its fastest pace since 2015 this year, with unemployment falling near two-decade lows and initial claims falling to 44-year lows. New home sales accelerated into the close of the year. After spending most of 2016 and 2017 around an average annualized pace of 550,000, sales climbed to 733,000 in November.

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