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Fed Raised Rates As Expected, Market Poised For More Gains

The markets ended mostly higher yesterday with gains of anywhere from 0.20% to 0.55%. Although, the S&P edged lower by -0.05%.

After the Fed raised rates by a quarter point, a move widely expected, financial stocks headed lower. Analysts are pointing to the Fed keeping their interest rate outlook unchanged from last time as the reason. Some were hoping to see the Fed take a more hawkish stance than the dovish one they've been on. But I think the Fed set the right tone.

However, with their GDP forecast being raised from 2.1% to just 2.5%, I think there's plenty of room for upward adjustments in the new year. Especially given that GDP this year is already pacing at +3%. And that doesn't include any of the benefits from the expected tax cuts that should roll out in 2018. So GDP looks like it could surpass the Fed's expectations rather easily. (It already has.) Moreover, with the new Fed Chair taking the reins early next year, the path which was reiterated today, could very well be subject to change.

Point being, I think the pullback in financials today was transitory. I would not read too much, if anything, into it.

In other news, yesterday's MBA Mortgage Applications were off -2.3% with purchases down -1.0% and refi's down -3.0%. On a seasonally adjusted basis, however, purchases are actually 10% higher than where we were last year at this time.

The Consumer Price Index was up 0.4% on a m/m basis and 2.2% y/y. Less food & energy, the y/y change comes in at 1.7%. The reported noted a sharp drop in apparel as weighing on the numbers. Nothing ominous. Instead, they point to seasonal discounting as the culprit.

Reports of more progress being made on the reconciled tax cut bill buoyed the market. And the original timeline of getting it to the President's desk by Christmas was reiterated.

Only 12 more trading days left in the year. And net-net, I'm expecting them to be up as December typically is.

But as these last couple of weeks wind down, you should start looking at how you did in the market this year. Hopefully you crushed it. Or at least kept pace. But sadly, there are far too many that probably underperformed. Now's the time to pat yourself on the back for what you did right, and to figure out what you did wrong so you can correct it for next year. Get a head start on 2018 with my latest commentary...

Are You Beating The Market This Year?

Kevin Matras

Executive Vice President, Zacks Investment Research


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