The Fiduciary Rule Marches On

Market Digest – Week Ending 5/26/2017
U.S. stocks closed mixed on Friday ahead of the long weekend, but the S&P and NASDAQ ended slightly up, closing at an all-time high. Despite some disappointing domestic housing and manufacturing reports, markets were up nicely for the week rising more than 1%. The U.S. economy grew at an annual rate of 1.2% for the first quarter after the second reading, and durable goods orders for April fell less than expected.

Weekly Returns:
S&P 500: 2,415 (+1.38%)
FTSE All-World ex-US: (+0.01%)
US 10 Year Treasury Yield: 2.25% (+.02%)
Gold: $1,267 (+.01%)
EUR/USD: $1.117 (-.02%)

Major Events:

  • Monday – Blackstone’s stock surges on Saudi infrastructure commitment
  • Tuesday – Target to pay $18.5 million to settle the massive 2013 data breach
  • Wednesday – Moody’s serves warning to China with a downgrade
  • Thursday – OPEC extends oil output cuts, but is under pressure from shale
  • Friday – Second reading of Q1 GDP increased to 1.2%, the weakest since Q1 2016

Our take:
There was a big announcement this week on the fiduciary front: The Labor Secretary stated that there is no legal basis to delay implementation of the Fiduciary Rule, which is set to become applicable on June 9. This expands the definition of who is a fiduciary and establishes impartial conduct standards. However, enforcement of this rule will not kick in until January 1, 2018. This leads to a little bit of uncertainty because the Department of Labor will continue to reassess the rule per the instructions of President Trump. That review can lead to changes of the “best interest” contract, which is a contract between an advisor and client, and could lead to advisors being able to still charge commissions and make money from third-party vendors. Read more about the “future of the rule” in our post from Monday.

It will be interesting to see how this rule changes and how it’s implemented by January 1 of next year. As a Registered Investment Advisor, Personal Capital will always be held to the fiduciary standard no matter what happens with this rule. Overall we hope it does get implemented since it benefits consumers. The industry as a whole has some big distrust issues (download the free 2017 Personal Capital Financial Trust Report).

The U.S. equity market will be closed on Monday due to Memorial Day. We wish you a wonderful extended weekend spent with friends and family.


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