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Compass Financial Advisors

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 A number of bank earnings and corporate reports sent the S&P 500 higher for the third consecutive week. Despite fears of a potential government shutdown, continued strong corporate profits and a synchronized global pickup in demand powered the Dow Jones Industrial Average past 26,000 for the first time. With roughly 10% of S&P 500 members reporting, earnings-per-share have increased by over 11% year-over-year. In bank earnings, Citigroup Inc. beat analyst expectations on better-than-expected consumer banking revenue and an improving efficiency ratio.

 U.S. 10-year treasury yields hit their highest mark since September 2014 on Friday as investors focused on the threat of a government shutdown. Notes from the Beige Book indicated that the Fed views the U.S. economy as robust, but wage pressures are modest. Dallas Fed President Robert Kaplan said there could be more than three rate increases in 2018. Industrial production displayed a strong finish to 2017 by beating consensus expectations, increasing 0.9% in December versus the expected 0.5%.

 View from the Observation Deck  

 View from the Observation Deck 
 

 Equities continue to climb higher in 2018 with the S&P 500 Index returning 1.61% last week. The index has delivered only one down day in the first two weeks of the year as investors continue to show their confidence in stocks. Wednesday was the only down day for the index as most sectors were in negative territory, with financials and industrials showing strength. The start of fourth quarter earnings season kicked off with financials showing good results. JPMorgan Chase & Co., BlackRock Inc., and The PNC Financial Services Group Inc.

 The Bank of Japan revealed last week it would start to trim purchases of Japanese government bonds, beginning an unwinding of ultra-accommodative monetary policy. The news sent long-dated Treasury yields higher on Tuesday as investors gained confidence in the global economic recovery. The announcement by Chinese officials on Wednesday that the Chinese Central Bank may slow or even halt purchases due to trade tensions with the U.S sent the 10-year Treasury note yield over 2.50%. Bond prices rose after the December Producer Price Index report was released showing an unexpected drop.

Bob Carey, Chief Market Strategist at First Trust Advisors L.P., discusses four strategic priorities investors should consider in 2018. 

  View from the Observation Deck  

 Equities ended a strong 2017 lower for the week on light trading volume with the S&P 500 Index notching a 21.8% total return for the year. In 2017, stocks benefited from increased global demand, growth in corporate profits, especially from technology stocks and an accommodative Federal Reserve. In addition, anticipation of lower corporate tax rates and less onerous regulation helped to propel the S&P 500 Index to its ninth consecutive annual gain, including dividends, and best annual gain since 2013.

 The yield curve has continued to flatten even as equity markets ushered in 2018 with excitement. The steepness of the yield curve is generally taken to be indicative of investor expectations for future growth, inflation or both. Future implied probabilities indicate the market believes that the Federal Funds rate will end 2018 between 1.75% and 2.25% and with the 10 year currently yielding roughly 2.5% investors will hope to see the rate increases bump up the longer end of the curve and not just the front end. Oil rallied hard to begin the year as U.S.

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Securities offered through Harbour Investments, Inc.,
member FINRA/SIPC. http://www.finra.org/
http://www.sipc.org/about-sipc

Investment Advisory Services offered through
Compass Financial Advisors, LLC,
a registered Advisor. 
Compass Financial Advisors, LLC &
Harbour Investments, Inc.
are separate entities.

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