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Weekly Market Commentary (December 14, 2015)

Weekly Market Commentary
December 14, 2015
 
It’s not like it’s a surprise!
 
Last week, investors didn’t appear to be thrilled with the possibility the Federal Reserve might raise rates this week. They also weren’t too impressed by another drop in oil prices. There was red ink everywhere as markets from Australia to Hong Kong, across the Eurozone, and throughout the Americas moved lower last week.
 
Bloomberg reported there was a 74 percent probability of a Fed rate hike at the December Federal Open Market Committee meeting. The Wall Street Journal’s survey of business and academic economists put the chance at 97 percent. More than 80 percent of those surveyed said the Fed would lose credibility if it doesn’t act in December.
 
It’s important to remember the Fed doesn’t actually set interest rates. It takes actions designed to influence financial behaviors. Even if the Fed does push to increase interest rates, it remains to be seen whether its efforts will bear fruit. The Financial Times wrote:
 
“...As “lift-off” has drawn closer some analysts have begun to highlight just how experimental this interest rate rise will be. The Fed’s bloated balance sheet - swelled by its quantitative easing program - prevents it from using its traditional interest rate tools, so it has unveiled and has been testing new ones. The main new levers are known as the “interest on overnight reserves” and the “overnight reverse repo program,” and central bank officials are confident that they will be able to lift the Fed funds rate, which is the main target. But some analysts caution that it could be a choppy take-off.”
 
If the Fed acts and interest rates don’t respond, there may be further volatility. The Financial Times reported markets almost certainly have priced in a rate hike at this point. We’ll find out next week.
 

Data as of 12/11/15
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
-3.8%
-2.3%
-1.1%
12.1%
10.2%
4.8%
Dow Jones Global ex-U.S.
-3.1
-8.3
-8.4
-0.1
-1.1
0.6
10-year Treasury Note (Yield Only)
2.1
NA
2.2
1.7
3.3
4.6
Gold (per ounce)
-0.6
-10.6
-11.8
-14.4
-5.2
7.2
Bloomberg Commodity Index
-4.0
-24.8
-29.2
-17.7
-12.9
-7.9
DJ Equity All REIT Total Return Index
-2.0
-1.0
-0.3
9.9
11.6
6.9
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
 
next year, China’s renminbi (A.K.A. yuan) will join the U.S. dollar, euro, yen, andpound,when it is added to the International Monetary Fund (IMF)’s Special Drawing Rights (SDR) basket - a supplementary foreign exchange reserve asset that is defined and maintained by the IMF. It will become the third weightiest currency in the basket. After the renminbi is added, the U.S. dollar will comprise 42 percent of the basket (unchanged from 2010). The euro will be 31 percent (down from 37 percent in 2010). The renminbi will be 11 percent. The Japanese yen will be 8 percent (down from 9 percent in 2010). The British pound will be 8 percent (down from 11 percent).
 
Managing Director of the IMF Christine Lagarde said:
 
“The Executive Board's decision to include the RMB in the SDR basket is an important milestone in the integration of the Chinese economy into the global financial system. It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems. The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy.”
 
So, is the renminbi likely to give the U.S. dollar a run for its money? Not any time soon, according to economists surveyed by The Wall Street Journal. Over the next 50 years, they gave China about a 34 percent chance of challenging the dollar. One said, “To match the dollar’s appeal, China will need markets as deep as those in the U.S. and to produce economic indicators that are trustworthy.”
 
Weekly Focus - Think About It
 
“Power is of two kinds. One is obtained by the fear of punishment and the other by acts of love. Power based on love is a thousand times more effective and permanent then the one derived from fear of punishment.”
--Mahatma Gandhi, Former leader of the Indian independence movement
 
Best regards, 
Lee Barczak
President
 
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. 
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Weekly Market Commentary (December 7, 2015)

 Market Commentary
December 7, 2015
 
The Markets
 
Anyone looking at U.S. stock market performance last week might assume it was a pretty quiet week. They would be wrong. It was a very bouncy week. U.S. stock markets moved lower on Monday, rebounded on Tuesday, and then appeared to suffer a one-two punch mid-week that knocked indices lower.
 
On Wednesday, the benchmark U.S. oil price sank below $40 a barrel as supply continued to exceed demand, according to The Wall Street Journal (WSJ). Analysts had expected stockpiles of crude oil, gasoline, and other fuels to decline. Instead, stores increased to more than 1.3 billion barrels. The glut of fuel drove energy stock values down and energy stocks led the broader market lower, according to WSJ.
 
Performance did not improve on Thursday. In part, this was because the European Central Bank (ECB) underwhelmed markets when it delivered economic measures that were less stimulative than many had expected. The Financial Times reported the ECB reduced rates and pledged to extend quantitative easing for six additional months, but it did not increase the amount of its bond purchases, which disappointed investors. Stock markets in Europe and the United States lost value on the news.
 
On Friday, a strong jobs report restored investors’ enthusiasm and markets regained losses suffered earlier in the week, according to ABC News. The Department of Labor announced 211,000 jobs were added in November, which was more than analysts had expected. Strong employment numbers made the possibility of a Federal Reserve rate hike seem more certain and investors welcomed certainty. The ECB jumped into the good-news pool on Friday, too, announcing it would expand stimulus measures, if necessary.
 
The Standard & Poor’s 500, Dow Jones Industrial, and NASDAQ indices were all up for the week.
 

Data as of 12/4/15
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
0.1%
1.6%
1.0%
14.1%
11.3%
5.2%
Dow Jones Global ex-U.S.
-0.7
-5.4
-7.7
1.4
-0.2
1.0
10-year Treasury Note (Yield Only)
2.3
NA
2.3
1.6
2.9
4.6
Gold (per ounce)
2.1
-10.0
-10.7
-14.0
-5.3
7.9
Bloomberg Commodity Index
0.7
-21.7
-27.2
-16.9
-11.9
-7.3
DJ Equity All REIT Total Return Index
-1.2
1.0
2.2
11.1
11.7
7.1
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
 
it’s that time of the year. No, not the holidays. It’s the time when investors begin to consider pundits’ forecasts for the coming year. Here are a few of those forecasts:
 
“Flat is the new up,” was the catch phrase for Goldman Sachs’ analysts last August, and their outlook doesn’t appear to have changed for the United States. In Outlook 2016, they predicted U.S. stocks will have limited upside next year and expressed concern that positive economic news may bring additional Fed tightening. Goldman expects global growth to stabilize during 2016 as emerging markets rebound, and Europe and Japan may experience improvement.
 
Jeremy Grantham of GMO, who is known for gloomy outlooks, is not concerned about the Federal Reserve raising rates, according to Financial Times (FT). FT quoted Grantham as saying, “We might have a wobbly few weeks...but I’m sure the Fed will stroke us like you wouldn’t believe and the markets will settle down, and most probably go to a new high.” Grantham expects the high to be followed by a low. He has been predicting global markets will experience a major decline in 2016 for a couple years, and he anticipates the downturn could be accompanied by global bankruptcies.
 
PWC’s Trendsetter Barometer offered a business outlook after surveying corporate executives. After the third quarter of 2015, it found, “U.S. economic fundamentals remain strong, but markets and executives like predictability, and that’s not what we’ve been getting lately... Trendsetter growth forecasts are down, so are plans for [capital expenditure] spending, hiring, and more. It doesn’t help that we’ve entered a contentious 2016 election season...”
The Economist had this advice for investors who are reviewing economic forecasts, “Economic forecasting is an art, not a science. Of course, we have to make some guess. The average citizen would be well advised, however, to treat all forecasts with a bucket (not just a pinch) of salt.”
 
Weekly Focus - Think About It
 
“Weather forecast for tonight: dark.”
--George Carlin, American comedian
 
Best regards,
Lee Barczak
President

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.
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Weekly Market Commentary (November 30, 2015)

Weekly Market Commentary

November 30, 2015

The Markets

American markets were relatively quiet during Thanksgiving week but there were fireworks in China’s markets.

Late in the week, media outlets reported the China Securities Regulatory Commission was conducting inquiries into several securities firms as part of an anti-corruption crackdown triggered by last summer’s wild market gyrations. The news sizzled through China’s stock markets. The Financial Times wrote:

“It's like a trip down memory lane… if memory lane was vertical… The Shanghai Composite was down by as much as 6.1 percent in late trade, with the tech-focused Shenzhen Composite following suit, down by as much as 6.8 percent. It would be Shanghai's biggest one-day fall since August 25, when the benchmark slumped by 7.7 percent, writes Peter Wells in Hong Kong.”

U.S. markets were sanguine, in part, because there was little activity on Friday, according to The Wall Street Journal. It also may have something to do with an upward revision in third quarter’s gross domestic product (GDP), which measures the value of all goods and services produced in the United States. On Tuesday, the U.S. Commerce Department reported GDP increased at an annual rate of 2.1 percent during the third quarter, an improvement over the initial estimate of 1.5 percent.

Next week may be a doozy. The European Central Bank is expected to introduce additional monetary easing measures, while the U.S. Federal Reserve provides additional clues about the timing of its monetary tightening measures, said The Wall Street Journal. We’ll also get news about U.S. home sales, automobile sales, chain store sales, factory orders, and employment. It’s likely to be an interesting week.


Data as of 11/27/15

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.1%

1.5%

1.1%

14.3%

12.0%

5.2%

Dow Jones Global ex-U.S.

-0.8

-4.7

-7.9

2.2

0.8

1.3

10-year Treasury Note (Yield Only)

2.2

NA

2.2

1.7

2.8

4.4

Gold (per ounce)

-2.3

-11.8

-11.5

-15.4

-4.9

7.9

Bloomberg Commodity Index

-0.4

-22.3

-28.2

-17.4

-11.2

-6.8

DJ Equity All REIT Total Return Index

0.9

2.2

3.5

12.0

12.4

7.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

it seems that shopping has joined food, football, and family as a favorite pastime on Thanksgiving Day.

Did you log on and do a little holiday shopping last Thursday while your holiday feast was cooking? If so, you are not alone. MarketWatch reported consumers spent $1.1 billion between midnight and 5:00 p.m. eastern time on Thanksgiving Day. That was a 22 percent increase over the year before.

After taking a break to give thanks, gorge on Thanksgiving delicacies, and enjoy family time, consumers fired up their devices again – more than one-third of sales were made via smart phone or tablet – for round two in the online shopping arena. On Friday, between midnight and 11:00 a.m. eastern time, they spent another $822 million. That’s 15 percent more than last year. In total, Black Friday sales were expected to be about $2.6 billion.

By Friday morning, out-of-stock rates were reported to be double the level they normally reach this time of year. So, prepare for the possibility shoppers may be rabidly seeking more than one extremely popular gift item as we head deeper into the holiday shopping season.

That’s a more welcome turn of events than 1953’s glut of unsold turkeys. The Fiscal Times reported Swanson got started in the frozen dinner manufacturing business when it finished Thanksgiving with 260 tons of extra turkeys. Its solution was to package sliced turkey with trimmings on aluminum trays. In 1954, the company sold 10 million frozen turkey dinners and a new industry was born.

Since investors were concerned about weaker than expected retail sales just a couple of weeks ago, if retail spending continues to be strong in coming weeks, it could affect investors’ confidence and outlook.

Weekly Focus – Think About It

“My first rule of consumerism is never to buy anything you can’t make your children carry.”

--Bill Bryson, American author

Best regards,

Lee Barczak

President

 

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.*Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.* Past performance does not guarantee future results. Investing involves risk, including loss of principal.* You cannot invest directly in an index.* Consult your financial professional before making any investment decision. 

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Weekly Market Commentary (November 23, 2015)

Weekly Market Commentary

November 23, 2015 

The Markets

Financial markets were remarkably calm last week.

Many stock markets in the United States, Europe, and Asia moved higher as investors chose to focus their attention on the minutes of the October 27-28, 2015 Federal Open Market Committee (FOMC) meeting, which were released on Wednesday, rather than recent terrorist attacks in Paris, Lebanon, Mali, and against Russia.

The FOMC minutes captured attention because they suggested even if the Federal Reserve does begin to tighten monetary policy in December, rate increases may be incremental and the target rate may not be as high as many imagined. Bloomberg reported:

“Fed officials received a staff briefing on the equilibrium real interest rate, or the policy rate that would keep the economy running at full employment with stable prices, according to the minutes. Fed officials discussed the possibility that the short-run equilibrium rate “would likely remain below levels that were normal during previous business cycle expansions,” the minutes said.”

Former Federal Reserve Chairman Ben Bernanke has written about the equilibrium real interest rate on his blog. The point he makes is the equilibrium rate – not the Fed – determines interest rates. The Fed uses its influence to move interest rates toward levels that are consistent with its estimate of the equilibrium rate. If the Fed pushes for rates that are too high, the economy may slow. If it pushes for rates that are too low, the economy may overheat. Not everyone agrees on this point, and that has led to debate between Mr. Bernanke and Former Treasury Secretary Lawrence Summers.

While the Fed is expected to begin tightening U.S. monetary policy, the European Central Bank (ECB) is expected to further loosen monetary policy in December. The Wall Street Journal reported the ECB is “prepared to deploy its full range of stimulus measures to fight low inflation…” The news was welcome. CNBC reported European markets closed the week at three-month highs.


Data as of 11/20/15

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

3.3%

1.5%

1.8%

14.6%

11.8%

5.2%

Dow Jones Global ex-U.S.

2.5

-3.9

-6.4

3.1

0.2

1.5

10-year Treasury Note (Yield Only)

2.3

NA

2.3

1.7

2.8

4.5

Gold (per ounce)

0.0

-9.8

-9.1

-14.5

-4.4

8.3

Bloomberg Commodity Index

-1.2

-22.0

-31.0

-17.1

-10.9

-6.8

DJ Equity All REIT Total Return Index

3.8

1.3

5.2

11.8

12.4

7.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

if there were a “Page Six” for finance and economics, emerging markets would be splashed across it.

Remember the saying, “Buy low and sell high?” Well, emerging markets have not performed well for quite a long time, and that has a lot of people speculating about what may happen in the next few years.  

Analysts at BlackRock opined, “Emerging-market (EM) equities are fighting an uphill battle, held back by an appreciating U.S. dollar, falling commodity prices, and flagging exports. These only add to their other medium-term struggles, such as dwindling corporate profits, declining productivity, and a dispirited investor base. With valuations of EM equities trading at the largest discount to their developed-market peers in 12 years, some opportunities are beginning to emerge.”

In fact, several economists and asset managers have begun to compare and contrast the attributes of various emerging markets. Some say China is a better bet than Latin America. Others like the opportunities in Southeast Asia. A Goldman Sachs analyst cited by Bloomberg cautioned, “…Colombia, South Africa, Turkey, and Malaysia still need to tackle their current-account imbalances; Russia, India, and Poland are among nations that have improved enough for their assets to rally…”

The point is there is a buzz building around emerging markets. Sometimes, when analysts begin to emphasize the potential of an asset class, investors are tempted to pile in. While emerging markets investments can be a valuable part of a well allocated and diversified portfolio, it’s a good idea to remember there are distinct risks which are not suitable for all investors associated with investing in emerging markets.

If you have questions about your financial strategy, please give contact your financial advisor.

Weekly Focus – Think About It

“All you need in this life is ignorance and confidence, and then success is sure.”

--Mark Twain

Best regards,

Lee Barczak

President

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.

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Weekly Market Commentary (November 9, 2015)

Weekly Market Commentary

November 9, 2015

The Markets

And, the Bureau of Labor Statistics (BLS) said…

U.S. job growth surpassed expectations in October. About 271,000 jobs were created across diverse industries: professional and business services, health care, retail, construction, and others.  That was a significantly higher number than predicted by economists who participated in a survey conducted by The Wall Street Journal. They expected to see 183,000 new jobs for October.

The BLS revised August and September jobs numbers higher overall and reported improvement on the wage front, too. Average hourly earnings increased by nine cents during October. For the year, hourly earnings are up 2.5 percent. Rising wages and a 5 percent unemployment rate “appear to indicate the labor market has reached full employment,” reported Barron’s.

Strong employment data supports the idea the Fed will begin to lift the Fed funds rate this year. On Friday, former Chairman of the Federal Reserve Ben Bernanke wrote in his blog:

“Wednesday was something of a trifecta for Fed watchers: Chair Yellen, Board Vice-Chair Stanley Fischer, and Federal Reserve Bank of New York president Bill Dudley (who is also the vice chair of the Federal Open Market Committee) all made public appearances. Moreover, the comments by all three members of the Fed’s leadership explicitly or implicitly supported the idea that a December rate increase by the FOMC is a distinct possibility. (The possibility of a rate increase is even more distinct with this morning’s strong job market report.)”

Markets responded swiftly, according to The Wall Street Journal, as investors repositioned their portfolios in anticipation of a rate hike. While stock market indices remained relatively steady, there was considerable volatility within certain sectors. An expert cited by the publication commented:

“…one of the big rotation trades on Friday was investors taking money out of companies such as utilities and real-estate-investment trusts, and putting it into those that are expected to benefit from higher rates, such as financial companies.”


Data as of 11/6/15

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

1.0%

2.0%

3.4%

13.7%

11.4%

5.6%

Dow Jones Global ex-U.S.

-1.0

-4.2

-5.6

2.4

-0.4

1.5

10-year Treasury Note (Yield Only)

2.3

NA

2.4

1.7

2.6

4.6

Gold (per ounce)

-4.7

-9.2

-4.9

-13.7

-4.8

9.1

Bloomberg Commodity Index

-2.5

-18.3

-27.1

-15.7

-11.1

-6.5

DJ Equity All REIT Total Return Index

-1.9

-0.3

3.1

10.4

10.6

7.6

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

it wasn’t just about the budget. Last week, the bipartisan budget bill was signed into law, averting a U.S. default and deferring further battle over debt and spending levels until presidential and congressional elections are over, according to U.S. News & World Report.

The new law includes provisions that CBS Money Watch said are likely to strengthen Social Security and Medicare by improving the programs’ finances. Since the provisions also have the potential to reduce benefits for some Americans, they may not prove to be all that popular. Here are two of the changes that affect Social Security benefits:

  • File-and-suspend strategies will be limited in 2016. This change could cost some Americans up to $50,000 in lifetime Social Security benefits, according to PBS News Hour. The strategy entails having a husband or wife file for Social Security benefits at full retirement age and then suspend the benefits immediately. This allows a spouse to claim a spousal benefit, while the husband or wife receives delayed retirement credits.

Effective May 1, 2016, no one will be able to voluntarily file and suspend benefits to make a spousal benefit available to a spouse or to protect the right to file for retroactive benefits.

  • Restricted application strategies will not be an option after 2015. Restricted application also is a Social Security claiming strategy. It allows an applicant to receive spousal benefits while earning delayed retirement credits until age 70. Americans who meet age requirements in 2015 can employ the strategy; younger Americans cannot.

If you are currently employing these strategies, you are probably grandfathered. We’ll know more when the Social Security Administration offers some insight as to how the new rules will be interpreted. That’s expected to happen before the end of the year. In the meantime, if you have questions about how this may affect your retirement plans, please contact your financial advisor.

Weekly Focus – Think About It

“The easiest thing to be in the world is you. The most difficult thing to be is what other people want you to be. Don't let them put you in that position.”  --Leo Buscaglia, American author and motivational speaker

Best regards,

Lee R Barczak

 

President

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.  *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.  * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.  * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.  * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.  * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.  * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.  * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.  * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.  * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.  * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.  * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.  * Past performance does not guarantee future results. Investing involves risk, including loss of principal.  * You cannot invest directly in an index.  * Consult your financial professional before making any investment decision.

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