Well, that was quite a week!
And I’m not even talking about the financial markets, although Friday’s whipsaw action in big tech names was a notable exception. The Dow was up about 0.3% on the week while the S&P 500 was down 0.3%. Tech looked like it was going to lead again this week until Friday’s plunge. The Nasdaq lost about 1.6% on the week. The FANG stocks – Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOG) – all posted losses in the 3-4% range on Friday.
Friday’s move was interesting in that it marked a decided move out of tech stocks and into financials and small caps, two areas of the market that have underperformed in 2017. Is it a sign of a broader change in market leadership? Hard to say based on just one day but many tech stocks are in overvalued territory and a modest pullback from current levels wouldn’t necessarily be a bad thing.
The big event on the economic calendar is this week’s FOMC meeting culminating in Wednesday’s interest rate decision. The market is widely expecting a 25 basis point hike but keep an eye on the statement following. I wouldn’t expect to hear anything particularly unexpected but the Fed could move to a more neutral, or even hawkish, tone based on recent mixed data.
The headlines this week were dominated once again by political news. The Comey testimony turned into must-see TV. Nearly 20 million people tuned in, a number that rivals this year’s NBA Finals. And that doesn’t even count people who watched it in bars or restaurants or streamed it live online. Over in the U.K., Prime Minister Theresa May’s decision to call a snap election three years ahead of schedule in order to increase her leverage in the Brexit negotiations backfired drastically as not only did she not increase her party’s majority but actually lost it altogether.
In the coming Fed-driven week, here are my four ETFs to watch in the coming days.
iShares JPMorgan USD Emerging Markets Bond ETF (EMB)
