As November drew to an end, market indices approached record levels buoyed by strong economic data and reassured by the testimony delivered to the Senate Banking Committee by Federal Reserve Chairman nominee Jerome Powell.
The Conference Board’s consumer confidence index for November 2017 hit the highest point recorded in almost 17 years. Economists had predicted an increase to 124, but the November statistics beat predictions for elevations to 129.5. News from the housing sector was good, too, with single-family home sales hitting a 10-year high in October. Also, retail analysts were pleased to see strong preliminary sales data for Black Friday and Cyber Monday, and noted that the strength of post-Thanksgiving retail shopping suggested that an equally strong holiday shopping season lies ahead.
Jerome Powell, President Trump’s nominee to take over from current Federal Reserve Chairwoman Janet Yellen, spoke before the Banking Committee on Nov. 28 and provided the reassurance that Wall Street and the financial sector wanted to hear. He aligned himself firmly with the central bank policies of Chairwoman Yellen and her predecessor, Ben Bernanke, and indicated his support for the Fed’s past efforts to strengthen financial regulation following the meltdown of 2008. In doing so, he distanced himself from the anti-regulation standpoint and harsh criticism of the Consumer Federal Protection Bureau voiced recently by President Trump, but he also clearly outlined his openness to change: “… we will continue to consider appropriate ways to ease regulatory burdens while preserving core reforms…”
Mr. Powell, who has been a Federal Reserve governor since 2012, also noted that he would resist any political pressure and would be “guided solely by our mandate from the Congress and the long-run interests of the American public.”
While Mr. Powell was getting ready for his Senate meeting, Dallas Federal Reserve Bank President Robert Kaplan was making the case for a December interest-rate hike, with more to come in the New Year. In advance of the December Federal Reserve meeting, Mr. Kaplan has drafted an essay that outlines “an overall strategy of removing accommodation in a gradual and patient manner.” His comments are in line with financial analysts’ expectations for the near future.
As Wall Street begins to look ahead to 2018, it’s also time for individual investors to attend to year-end investment housekeeping before ringing in the New Year. Here’s a quick investment checklist:
- Rebalance your mix of stocks, bonds and other financial instruments. This year’s market highs may have thrown your mix of investment vehicles out of alignment. If you and your advisors determined a specific investment ratio designed to balance risks and returns more than a year ago, it might be time to see if this mix still meets your overall investment needs.
- Review your entire stock portfolio to see if it is time to make some adjustments. After a 9-year bull run, it might be time to liquidate some of your high flyers with lofty price-to-earnings ratios in favor of some solid and steady stocks – like consumer staples. Decisions like this should be based on a careful review of your long-term asset allocation strategy.
- You have until the tax year ends to sell any investments that have lost value, but why not harvest these tax losses now? You can lock in the loss and count it against any gains you make on other stocks.
The commentary above is designed to be general in nature. Consult your tax and investment professionals regarding your personal financial and investment strategies.