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Posted on October 2, 2017

Weekly Market Commentary October 2, 2017

Market Commentary

U.S. markets reacted positively to the Trump administration tax proposal. For the week, the S&P 500 climbed 0.7% higher. The MSCI ACWI was basically unchanged. The Bloomberg BarCap U.S. Aggregate Bond Index slipped -0.1%.

The global economy continues to expand while politicians in countries such as the U.S. and Japan focus on revving up economic growth through tax reform or additional spending. In the U.S., the Federal Reserve continues to wrestle over whether or not to raise rates while inflation is below 2%.

Key Points for The Week

  • A speech by Fed Chair Janet Yellen and estimates for declining unemployment raised the odds of an interest rate hike in December.
  • President Trump’s tax plan provides a framework for rates, but expect adjustments in Congress.
  • Major global economies are all in expansion mode for the first time since 2007.
  • The S&P 500 has been up every month so far this year.

What are we reading?

Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links.

Yellen says Fed should be ‘wary’ of raising rates ‘too gradually’

Earlier this week, Fed Chair Janet Yellen said increasing rates too gradually could lead to a lagged inflation problem down the road. Yellen’s comments show she is in the majority at the central bank, which favors one more rate hike before year-end. Markets have priced in a 70% chance for a December rate hike.

Trump, GOP to cut top rate to 35 percent

President Donald Trump and Republican leaders hope to drop the highest income tax rate to 35% and dramatically reduce the corporate tax rate from 35% to 20%. Part of their plan, unveiled last week, includes protections to prevent wealthier people from skewing their income to make them eligible to receive the small business rate, which Trump plans on lowering to 25% from 39.6%. Trump’s plan also includes doubling the standard deduction for most households. The tax reform plan will likely go through many adjustments as 45 of 48 Democratic U.S. Senators have stated they will not support a tax bill that adds to the deficit.

Abe calls snap election in Japan, readies $18 billion package

Japanese Prime Minister Shinzo Abe announced an $18 billion economic package last week. He revealed numerous economic measures in the package, including higher spending on education, which would be funded by an increased tax rate. This plan is much different from the previous one, which aimed to reduce the nation’s debt. Abe also called for a snap election, saying he is changing a pledge made to the public so must seek the will of the people.


Fun Story of the Week

High school student becomes second teen to join Kansas governor race

Getting into an elite college is a tough task. Two students in Kansas have taken a unique approach to standing out by hoping to add “Governor of Kansas” to their resumes. Tyler Ruzich, who will soon turn 17, has entered the race for governor, making him the second teenager to do so. The two teen candidates happen to be from different parties, so there’s a chance the final candidates could be two 17-year-olds. All jokes aside, Ruzich is ready to win.