-November 25th, 2016 Weekly Market Roundup. Equities continued their post-election rally as major indexes reached record highs Friday and have risen in each of the past three weeks. The S&P 500 Index finished the quarter with a gain of +3.9%. However, the performance gap between the best-&-worst-performing sectors during the quarter was more than 16%. Information technology, financials, and industrials were the strongest performers, delivering gains of +12.9%, +4.6% and +4.1%, respectively. The telecommunications services, utilities, and consumer staples sectors were the poorest relative performers, posting losses of -5.6%, -5.9% and -2.6%, respectively. Hence, the latter sectors are largely viewed as dividend income, which took it on the chin. However, it is essential to be mindful that dividend income is a critical component of the S&P 500's historical total return, contributing about 40%.
-November 18th, 2016 Weekly Market Roundup. The S&P 500 index gained 0.8% for the week while the Nasdaq Composite (+1.6%) outperformed after lagging one week ago. Conversely, the Dow Jones Industrial Average (+0.1%) underperformed after showing relative strength during the election week. In contrast, typically more stable areas of the market, including high-dividend stocks (including Utilities, Food & Beverage, and Household Products), declined. The market’s immediate Trump related focus will be on potential tax reform that, by some estimates, could boost corporate earnings by as much as 10%, followed by growth policies, infrastructure investment and the potential of allowing US companies to repatriate cash at a slashed 10% rate. Fed Chair Janet Yellen remarked Thursday, in her testimony before the Joint Economic Committee, that the U.S. economy is strong enough to withstand a rate hike, which could come “relatively soon.” Global bond markets continue to be driven by heightened inflation expectations. The yield on the bellwether 10-year U.S. Treasury, which moves in the opposite direction of its price, climbed to 2.34% on November 18, its highest level in more than a year.
-The current U.S. stock market trading trends have been unusual and a bit bipolar. For example, there has been odd sector rotation, where just yesterday (Nov 16th) more than 300 securities on the New York Stock Exchange hit 52-week highs, while more than 300 securities also hit 52-week lows.
-A recent Wall Street Journal article argues that Donald Trump’s presidency may cause a big downturn in the US real estate market and thus REIT investments. Trump is forecasted to boost growth and cause inflation, but it might be the impact that he has already had which will be the biggest factor for mortgage markets—higher rates. 30-year mortgage rates have already jumped 25 basis points since his election, and the higher interest rates which are expected to accompany his presidency could well cool the real estate market by putting currently lofty prices out of the reach of many borrowers. Prices have risen so much over the last few years in part because big mortgages were affordable compared to incomes as a result of really low rates.
-As a result the Trump Tantrum, the capitalization of a global bond-market index slid by $450 billion Thursday, a fourth day of declines that pushed the week’s total bond losses above $1 trillion for only the second time in two decades, via Bloomberg. In addition, Bank of America Merrill Lynch data showed the 30 year yields jumped (bonds dropping) the most this week since January 2009, and the week is not over yet. Trump's policies are expected to see inflation trending upwards over the coming years which is traditionally bad for bonds. Other income plays have also been hard hit – For example, RIETs have sold off and dividend equity sectors like Utilities and Consumer Staples are also down for the week. In turn, certain equity sectors rallied strongly on the Trump win such as basic materials (related to the Trump infrastructure investment initiative) and financials (expectation of higher rates, bringing greater profit spread for banks), healthcare, among others.
-Trump pulled off a surprise victory last night with the equity futures turning down in the -4.o% range. However, this morning the US equity indices are relatively steady, given certain sectors are offsetting losses in others. For example, Healthcare, Industrials & Financials are actually rallying. The S&P 500 has been teetering between -0.5% to +0.30 so far this morning.
-November 4th, 2016 Weekly Market Roundup. Equity markets closed lower across the board for the second straight week as all major indices and economic sectors retreated; the S&P 500 finished the week nearly -3% below its record high reached in mid-August. The S&P’s weekly loss marked the ninth consecutive day of declines for the S&P 500 Index, the longest stretch since December 1980. This statistic seems ominous on the surface, but surprisingly stocks historically have generally increased after similar declines, rising on average by 7% over the following six months. On the economic front third quarter's GDP report came in at a better-than-expected 2.9% - this growth rate has not seen since the third quarter of 2014. The Federal Open Market Committee (FOMC) left rates steady at its November meeting but strongly indicated that a hike is likely at the next meeting in December.
-The S&P 500 just completed seven (7) straight days of market losses. This level of daily losses is similar to the longest loss run in the past two decades (which was during the market crash of 2008), where the equity index fell for eight straight days. Fortunately, the difference between now and 2008 was back then the fall was far more steep and violent.
-“Going back 88 years, when stocks advance in the three months before the election, the nominee representing the party in the White House almost always wins (Hillary). When stocks are down in that period, the candidate challenging the incumbent party usually triumphs. Thus it can be said that the Standard & Poor’s 500 index has correctly predicted 19 of the past 22 presidential elections” according to a recent Barron’s piece. Now consider that the S&P 500 has fallen more than 4% since the start of August.
-November 18th, 2016 Weekly Market Roundup. The S&P 500 index gained 0.8% for the week while the Nasdaq Composite (+1.6%) outperformed after lagging one week ago. Conversely, the Dow Jones Industrial Average (+0.1%) underperformed after showing relative strength during the election week. In contrast, typically more stable areas of the market, including high-dividend stocks (including Utilities, Food & Beverage, and Household Products), declined. The market’s immediate Trump related focus will be on potential tax reform that, by some estimates, could boost corporate earnings by as much as 10%, followed by growth policies, infrastructure investment and the potential of allowing US companies to repatriate cash at a slashed 10% rate. Fed Chair Janet Yellen remarked Thursday, in her testimony before the Joint Economic Committee, that the U.S. economy is strong enough to withstand a rate hike, which could come “relatively soon.” Global bond markets continue to be driven by heightened inflation expectations. The yield on the bellwether 10-year U.S. Treasury, which moves in the opposite direction of its price, climbed to 2.34% on November 18, its highest level in more than a year.
-The current U.S. stock market trading trends have been unusual and a bit bipolar. For example, there has been odd sector rotation, where just yesterday (Nov 16th) more than 300 securities on the New York Stock Exchange hit 52-week highs, while more than 300 securities also hit 52-week lows.
-A recent Wall Street Journal article argues that Donald Trump’s presidency may cause a big downturn in the US real estate market and thus REIT investments. Trump is forecasted to boost growth and cause inflation, but it might be the impact that he has already had which will be the biggest factor for mortgage markets—higher rates. 30-year mortgage rates have already jumped 25 basis points since his election, and the higher interest rates which are expected to accompany his presidency could well cool the real estate market by putting currently lofty prices out of the reach of many borrowers. Prices have risen so much over the last few years in part because big mortgages were affordable compared to incomes as a result of really low rates.
-As a result the Trump Tantrum, the capitalization of a global bond-market index slid by $450 billion Thursday, a fourth day of declines that pushed the week’s total bond losses above $1 trillion for only the second time in two decades, via Bloomberg. In addition, Bank of America Merrill Lynch data showed the 30 year yields jumped (bonds dropping) the most this week since January 2009, and the week is not over yet. Trump's policies are expected to see inflation trending upwards over the coming years which is traditionally bad for bonds. Other income plays have also been hard hit – For example, RIETs have sold off and dividend equity sectors like Utilities and Consumer Staples are also down for the week. In turn, certain equity sectors rallied strongly on the Trump win such as basic materials (related to the Trump infrastructure investment initiative) and financials (expectation of higher rates, bringing greater profit spread for banks), healthcare, among others.
-Trump pulled off a surprise victory last night with the equity futures turning down in the -4.o% range. However, this morning the US equity indices are relatively steady, given certain sectors are offsetting losses in others. For example, Healthcare, Industrials & Financials are actually rallying. The S&P 500 has been teetering between -0.5% to +0.30 so far this morning.
-November 4th, 2016 Weekly Market Roundup. Equity markets closed lower across the board for the second straight week as all major indices and economic sectors retreated; the S&P 500 finished the week nearly -3% below its record high reached in mid-August. The S&P’s weekly loss marked the ninth consecutive day of declines for the S&P 500 Index, the longest stretch since December 1980. This statistic seems ominous on the surface, but surprisingly stocks historically have generally increased after similar declines, rising on average by 7% over the following six months. On the economic front third quarter's GDP report came in at a better-than-expected 2.9% - this growth rate has not seen since the third quarter of 2014. The Federal Open Market Committee (FOMC) left rates steady at its November meeting but strongly indicated that a hike is likely at the next meeting in December.
-The S&P 500 just completed seven (7) straight days of market losses. This level of daily losses is similar to the longest loss run in the past two decades (which was during the market crash of 2008), where the equity index fell for eight straight days. Fortunately, the difference between now and 2008 was back then the fall was far more steep and violent.
-“Going back 88 years, when stocks advance in the three months before the election, the nominee representing the party in the White House almost always wins (Hillary). When stocks are down in that period, the candidate challenging the incumbent party usually triumphs. Thus it can be said that the Standard & Poor’s 500 index has correctly predicted 19 of the past 22 presidential elections” according to a recent Barron’s piece. Now consider that the S&P 500 has fallen more than 4% since the start of August.