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Market Overview

Sources: Sources: Equity Market, Fixed Income and REIT returns from JP Morgan as of 9/18/15. Rates and Economic Calendar Data from Bloomberg as of 9/21/15.

Happening Now

In the hotly anticipated Federal Reserve rate decision last Thursday, Chair Janet Yellen and eight other voting members decided to leave rates unchanged for an unbelievable 54th straight meeting. The statement released and press conference that followed shed light into why the committee deemed it necessary to keep rates at the same level as when the global economy was staring into the abyss in December of 2008. Continued slack in the labor market and un-met inflation expectations where cited in the official statement released by the Fed; while global equity market volatility and concerns over Chinese economic growth were suggested during Yellen’s Q&A session. We also got a glimpse at the Fed’s “dot plot” chart that displays the 17 FOMC member’s views of where U.S. GDP, Inflation, Interest Rates and the U-4 unemployment rate will be over the course of the next few years. Relative to the June release, there were few changes in the Median Estimates of these measures, summarized below:

Considering the data in table above paints a more optimistic picture of U.S. GDP growth this year, a lower unemployment rate relative to the June meeting and actually higher core inflation this year, the fact that nine FOMC members voted to leave rates unchanged while only 1 voted to raise brings into question their motivation. The Fed’s dual mandate calls for monetary policy that supports price stability and maximum employment and it appears that by some measures, as depicted above, this criterion is being met.

Whatever the reasoning, the message received by market participants was that the U.S. Economy is not strong enough to endure a 25bps hike, adding to fears that the global economy is slowing down and fueling a sell-off in the S&P 500 index during Thursday and Friday’s trading. While we at Hennion and Walsh believe the U.S. economy is strong enough to endure a rate hike and will likely continue to see labor market tightening and a general improvement in economic stability, we are conscious of the divergence between economic and stock market performance. We are taking steps to help our client’s navigate the uncertainties that are contributing to the recent stock market volatility. To learn about the strategies we are using to help reduce risk while remaining positioned for longer term growth, please speak with your Hennion and Walsh Financial Advisor a member of the Hennion and Walsh Asset Management Team.

Important Information and Disclaimers

Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion and 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.

Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.

There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions. Distributions from REIT investments are taxed at the owner’s tax bracket.

The prices of small company and mid cap stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.

Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity.

Products that invest in commodities may employ more complex strategies which may expose investors to additional risks.

Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity. Bond Prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the value of your investment.

Definitions

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.

Investors cannot directly purchase any index.

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.