Economic Data Stabilizes ahead of Fed Meeting10-20-2015 |
Sources: Equity Market, Fixed Income and REIT returns from JP Morgan as of 10/16/15. Rates and Economic Calendar Data from Bloomberg as of 10/19/15.
Economic data last week pointed to a continuation of the slow economic growth that has characterized the global economy following the great recession of 2008 – 2009. The release of the Fed Beige Book ahead of the Federal Open Market Committee’s October 27/28 meeting painted a slightly negative picture. According to Bloomberg.com, “Only three of 12 districts are describing growth as “moderate”, and that’s as good as it gets. Six are using the word “modest” with two reports of immediate slowing and even one report of contraction from the energy-hit Kansas City district.” Inflation data furthered the case for no immediate rate hike during the October meeting (though an initial rate hike by the end of the year is still likely) with the Producer Price Index and the Consumer Price Index contracting -0.5% and -0.2% respectively. It should be noted, however, with regards to inflation that if you remove volatile food and energy prices the Consumer Price Index posted a year-over-year increase of 1.9%.
Lack of inflation and slow growth are nothing new to this market and stocks around the world finished last week mostly higher. The S&P 500 Index posted a 0.93% weekly gain, the MSCI EAFE Index (measuring international developed market stocks) rose 0.29% and the MSCI EM Index (measuring international emerging market stocks) gained 0.71%. The S&P 500 Index has now risen close to 6% this quarter alone despite an earnings season that is expected show net income fell an average of -4.6% over last year’s third quarter. Following a quarter that saw a contraction in this U.S. Large Cap stock-oriented index of almost 6.5%, volatility to the upside is now benefiting U.S. Large cap stock investors.
There are a number of headwinds that still face the U.S. and global economies including uncertainties surrounding the actual strength of the Chinese economy, U.S. Fiscal policy, the upcoming U.S. Presidential election in 2016 and the divergence in central bank monetary policies. For investors, we believe that it is prudent to consider the near-term market environment but long term success is still likely to be determined more from an implemented asset allocation strategy than from the ability to time the market or select “under-valued” companies. We recommend all investors review their portfolio at least quarterly and avail ourselves to any individuals looking for a second opinion or additional guidance. If you would like a complimentary portfolio review, please do not hesitate to speak with your Hennion and Walsh Financial Advisor a member of the Hennion and Walsh Asset Management Team.
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Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion & Walsh cannot guarantee the accuracy of said information and cannot be held liable. This information is provided for informational purposes only and is not a solicitation to buy or sell any of the asset classes or sectors discussed.
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MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.
MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.
Russell 3000: The Russell 3000 measures the performance of the 3000 largest US companies based on total market capitalization and represents about 98% of the investible US Equity market.
ML BOFA US Corp Mstr [Merill Lynch US Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire US corporate bond market over time.
ML Muni Master [Merill Lynch US Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.
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LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.
The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITSs that primarily own and operate income-producing real estate.