Market Direction Week of March 20, 2017©

Market Direction: BULLISH alert issued 11/10/2016 

Last Week Review: Stocks and bonds were higher on the week, with noticeable gains coming immediately after the Federal Reserve (Fed) raised short-term interest rates by 0.25%. While investors have been complacent, we expect volatility to rise to more normal levels in response to speculation over ongoing Fed policy, the potential timing of initiatives from the Trump administration, and other political uncertainties abroad. We expect the Fed to stay patient and slowly raise interest rates as the domestic economy improves. Even if interest rates rise slowly, they’ll still be low.

Both stocks and bonds recorded gains this week, with most of it coming after the Federal Reserve (Fed) announced a quarter-point rate hike, bringing the Federal Funds Rate target range to 0.75% - 1.00%. This is the Fed's third rate increase in the current expansion and its second in the last three months. This week's move by the Fed was largely anticipated, putting the markets' focus on the committee's commentary around the pace of additional rate hikes this year. The committee reiterated that it expects to raise short-term interest rates two more times in 2017, with the path for short-term interest rates remaining dependent on incoming economic data.

How the market finished last week, the S&P 500 up 0.2%, the Nasdaq up 0.7%, and the Dow up 0.1%.

This Week: Last week Friday (3/10) the bull market unofficially reached its 8^th anniversary, so I thought it might be appropriate to show how far it has come. Since the last new high was on 3/1/17, the anniversary won’t be official until another new high is reached after 3/10. However, since that only requires the SPX to increase about 0.5% from its current level, I expect that to happen soon. As you can see in the table below, the current bull market is now 98 months (2929 days) old. The 12-month gain is +20.4% and the cumulative gain since it began on 3/10/09 has been +254.2%, making this the 2^nd longest and 3^rd strongest bull market since WWII.

While the economic calendar is relatively light next week and there is always some risk of a pullback, indications are that any pullback is likely to be fairly shallow and would likely still represent a decent buying opportunity.

Economic Calendar: Current Account (3/21), Existing Home Sales (3/22), New Homes Sales (3/23), Janet Yellen Speaks (3/23), Durable Goods Orders (3/24)

Some of the major earnings announcements on deck: FDX, LEN, NKE, KBH, DRI.

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