February 2017 was a month filled with record highs in the domestic markets. The S&P 500 and NASDAQ both hit a number of new highs last month, while the Dow went on a record-busting streak. In fact, after reaching 20,000 for the first time ever in January, the Dow hit record highs every trading day between February 9 and 27. The last time we experienced a string of records like that was in 1987 — and this is only the second time it’s happened in the past 120 years.
Seeing stocks rise like this can be an exciting experience, but I want to caution you to not get caught up in euphoria. Just as emotion has no place in investing when the markets are volatile and challenging — the same rule applies when markets are growing. So, let’s dive deeper and review some of the fundamental data we learned in February to better understand where the economy stands.
On the labor front, last month gave us somewhat mixed data. We received the January jobs report, which showed that the economy added far more jobs than experts predicted and continued its 76th-straight month of growth. But on the other hand, hourly earnings and labor force participation each increased by only a small margin — while unemployment was also up slightly as more people entered the workforce again. Ultimately, the job data released in February indicates that the labor market is growing, but the pace is still not what many people would prefer.
Another area where we saw modest growth was in the revised GDP numbers for the fourth quarter of 2016. Each quarter, the Bureau of Economic Analysis calculates the U.S. Gross Domestic Product, which is the total dollar value of everything that people and businesses produced during that period. This measurement is a critical indicator of our economy’s health, so investors and financial analysts watch its changes very closely. And because the Bureau receives updated data after a quarter ends, they release three GDP numbers over the course of three months: Advance, Preliminary, and Final.
In February, we received the second, or Preliminary, reading of GDP for Q4 2016. Consensus was that the reading would increase to 2.1% from the 1.9% growth in January’s Advance report. But in reality, the reading didn’t change and stayed at 1.9%. For comparison, Q3 GDP came in at 3.5% growth.
Rather than indicating that the economy is slowing down, however, just one aspect of GDP contributed the most to the decreased growth: Lower net exports at the end of 2016. Trade is integral to our economy, so maintaining a healthy trade balance is key. As the political environment evolves, changes to trade deals could affect this balance and as a result, our GDP.
For now, no one can say what new policies may be on the horizon or if the markets will continue to reach even greater heights. So, we will continue to analyze the data and search for the most thorough view of our economic standing. This perspective is the foundation of our support, and we are here to help you find a clearer perspective amid the hype.
That’s it for this month’s educational economic update.
Disclosure: While we believe the information in this report is reliable, we cannot guarantee its accuracy. Opinions expressed are subject to change without notice and are not intended as investment advice or a solicitation for the purchase or sale of any security. Please consult your financial professional before making any investment decision.