The market continued to be focused on potential policy changes by the new administration. Discussions around tariffs and border taxes have been somewhat disconcerting. The policy focus has been geared more towards immigration and the Affordable Care Act, rather than tax cuts and fiscal policy.
Economic statistics were again mixed, but on balance, demonstrated that the economy continues to grow at a reasonable pace. Most notable were improvements in wages, consumer spending (particularly vehicle sales), construction spending, and business investment. On the other hand, housing sales were down considerably, and fourth quarter GDP came in at a disappointing 1.9%.
Inflation expectations rose slightly from the close of 2016, with the 5-year forward breakeven at just above 2.0%.