-December 30th, 2016 Weekly Market Roundup. Markets declined in the final week of the year on light trading volume over the holiday. Indeed, the Dow Jones Industrial Average recorded its first weekly loss since the presidential election. Nevertheless, the Trump election rally has propelled the major indices to impressive gains in 2016. For the year, the S&P 500® Index rose +9.5% and the NASDAQ advanced +7.5%. However, 2016 did not lift all boats, with typical safe haven equity sectors down, with healthcare finishing down by over -4% and consumer staples ending essentially flat for the year. Meanwhile, U.S. government bonds declined for the second consecutive year.
-December 23rd, 2016 Weekly Market Roundup. Stock market took a holiday break this week. Volatility dipped below 11 percent on Wednesday, the lowest the VIX index has hit since August 2015, and all three major indexes moved by 0.3 percent or less. Global equities dipped modestly this week while US indices barely budged.
-The U.S. Federal Reserve raised interest rates on Wednesday the 14th by a quarter point, or +0.25%. The Federal Open Market Committee raised its target range from 0.25 percent to 0.50 percent to a range of 0.50 percent to 0.75 percent. The overnight funds rate currently sits at 0.41 percent. Committee members lifted their expectations for GDP growth from 1.80 percent in 2016 to 1.90 percent, and 2.1 percent in 2017 against the previous estimate of 2.0 percent. The Fed continued to describe that pace as "gradual," keeping policy still slightly loose and supporting some further improvement in the job market. It sees unemployment falling to 4.5 percent next year and remaining at that level, which is considered to be close to full employment.
-December 9th, 2016 Weekly Market Roundup. The recent market rally resumed with stocks recording their best weekly performance since the presidential election. On Friday, the Dow Jones Industrial Average, S&P 500® Index, NASDAQ, and Russell 2000® all reached new record highs. In contrast, safe haven dividend income areas that have outperformed in recent years - including Utilities and Food & Beverage, and Household Products stocks - have fallen since the election. Likewise, bonds continue to drop in value as investors anticipate an environment with higher growth and higher inflation; long-dated fixed income investments are less attractive under these conditions. In this environment, our Model Portfolio and Growth Portfolios are faring well, but the retiree income portfolio remains lackluster. Looking under the hood in equity sectors show a different picture than what is discussed by the media. For example, the health care sector is down -3.7% ytd, consumer staples sector is only up 2.0% ytd, large growth stocks are only up 3.0% ytd, while REITs have lost about -3% these past three months. Moreover, the long-term corporate bond is down -7.3% over the past three months, US Core Corporate Bond has lost -3.2% in the past 13 weeks; government bonds are down -3.8%. The takeaway is we have short-term rotations going on with sharp differences between winning and losing sectors and asset classes. For example, financials are up over 22% this year, with basic materials and energy also both up over 20% this year – these are being driven by the perception that Trump will pour a trillion dollars in America’s infrastructure, including a wall. However, all this spending needs approval and Trump has shown that he sometimes exaggerates on what he wants to do versus on what he can do – such as getting a trillion dollars from congress. Hence, the bifurcation in sector performance may not have legs and sector rotational trends may recalibrate and normalize in the intermediate-term. Again, big sector winners are offsetting the anemic returns in what many consider to be the more stable equity sectors.
-December 2nd, 2016 Weekly Market Roundup. Equity markets retreated this week as the post-election rally stalled, with the S&P 500 finishing down -1.0% while the Russell 2000 lost -2.5%. The Barclays U.S. Aggregate Bond Index lost -2.4% in November to mark its worst drop in 10 years due to the strengthening U.S. economy (expected Fed increase), rising oil prices and the prospect of increased government spending under the Trump administration (more debt). The upcoming Italian election (called the referendum) could make it a tough trading period for the US markets on Monday (Sunday for EU). If the referendum is lost, it could prove a catastrophe for Italian bank shares and perhaps bank shares all across Europe.
-December 23rd, 2016 Weekly Market Roundup. Stock market took a holiday break this week. Volatility dipped below 11 percent on Wednesday, the lowest the VIX index has hit since August 2015, and all three major indexes moved by 0.3 percent or less. Global equities dipped modestly this week while US indices barely budged.
-The U.S. Federal Reserve raised interest rates on Wednesday the 14th by a quarter point, or +0.25%. The Federal Open Market Committee raised its target range from 0.25 percent to 0.50 percent to a range of 0.50 percent to 0.75 percent. The overnight funds rate currently sits at 0.41 percent. Committee members lifted their expectations for GDP growth from 1.80 percent in 2016 to 1.90 percent, and 2.1 percent in 2017 against the previous estimate of 2.0 percent. The Fed continued to describe that pace as "gradual," keeping policy still slightly loose and supporting some further improvement in the job market. It sees unemployment falling to 4.5 percent next year and remaining at that level, which is considered to be close to full employment.
-December 9th, 2016 Weekly Market Roundup. The recent market rally resumed with stocks recording their best weekly performance since the presidential election. On Friday, the Dow Jones Industrial Average, S&P 500® Index, NASDAQ, and Russell 2000® all reached new record highs. In contrast, safe haven dividend income areas that have outperformed in recent years - including Utilities and Food & Beverage, and Household Products stocks - have fallen since the election. Likewise, bonds continue to drop in value as investors anticipate an environment with higher growth and higher inflation; long-dated fixed income investments are less attractive under these conditions. In this environment, our Model Portfolio and Growth Portfolios are faring well, but the retiree income portfolio remains lackluster. Looking under the hood in equity sectors show a different picture than what is discussed by the media. For example, the health care sector is down -3.7% ytd, consumer staples sector is only up 2.0% ytd, large growth stocks are only up 3.0% ytd, while REITs have lost about -3% these past three months. Moreover, the long-term corporate bond is down -7.3% over the past three months, US Core Corporate Bond has lost -3.2% in the past 13 weeks; government bonds are down -3.8%. The takeaway is we have short-term rotations going on with sharp differences between winning and losing sectors and asset classes. For example, financials are up over 22% this year, with basic materials and energy also both up over 20% this year – these are being driven by the perception that Trump will pour a trillion dollars in America’s infrastructure, including a wall. However, all this spending needs approval and Trump has shown that he sometimes exaggerates on what he wants to do versus on what he can do – such as getting a trillion dollars from congress. Hence, the bifurcation in sector performance may not have legs and sector rotational trends may recalibrate and normalize in the intermediate-term. Again, big sector winners are offsetting the anemic returns in what many consider to be the more stable equity sectors.
-December 2nd, 2016 Weekly Market Roundup. Equity markets retreated this week as the post-election rally stalled, with the S&P 500 finishing down -1.0% while the Russell 2000 lost -2.5%. The Barclays U.S. Aggregate Bond Index lost -2.4% in November to mark its worst drop in 10 years due to the strengthening U.S. economy (expected Fed increase), rising oil prices and the prospect of increased government spending under the Trump administration (more debt). The upcoming Italian election (called the referendum) could make it a tough trading period for the US markets on Monday (Sunday for EU). If the referendum is lost, it could prove a catastrophe for Italian bank shares and perhaps bank shares all across Europe.