Market Commentaries

  • Markets Sleep on it, but Ultimately Cheer ECB Comments


    Market Overview


    Sources: Equity Market, Fixed Income and REIT returns from JP Morgan as of 03/11/16. Rates and Economic Calendar Data from Bloomberg as of 03/14/16.

    Happening Now                   

    Equities continued their winning streak last week with both domestic and international stock market indexes posting gains. The S&P 500 Index has now climbed back nearly 10% from its February 11, year-to-date low and is only 0.6% below its December 31, 2015 closing level. Emerging Market* stock performance also exhibited continuity as one of the best performing global equity indexes this month and is now up 1.08% this year.

    The gains witnessed last week were achieved despite the wild, seemingly directionless trading session Thursday that coincided with the European Central Bank’s (ECB) monetary policy announcement and Mario Draghi’s ensuing press conference. News of additional asset purchases at a heightened pace of €80 Billion a month, lower interest rates and an expanded universe of available bonds for buying initially were seen as positives for risk assets. This sentiment faded throughout the course of the U.S. trading session, however, and ultimately the euro gained versus the dollar, stocks sold off, and credit spreads widened. Some strategists pointed to Draghi’s comment, “…this is likely the last time we’ll lower interest rates” as the catalyst for the abrupt shift in stock market performance while others pointed out the economic weakness that must be present in the Eurozone for the ECB to believe such substantial action was necessary.

    Once market participants had a night to digest this news, they came back as willing buyers of stocks which lead to indexes around the world rebounding strongly during Friday’s trading session. Investors spooked by Thursday’s volatility should take note of what happened last week and remember that predicting day to day changes in stock prices generally has more to do with luck then skill. Because of the element of luck and randomness involved, it can be impossible to find success in an investment strategy that attempts to time daily changes in the stock market. With this being said, as an individual’s financial situation and stage of life change, adjustments to their asset allocation strategy are needed in order to meet long term goals. If you have not yet defined what goals you need to achieve with your investment dollars or are unclear about how to allocate your funds in this market/economic environment, please do not hesitate to speak with your Hennion & Walsh Financial Advisor or a member of the Hennion & Walsh Asset Management Team.

    *Emerging Market Stocks are measured by the MSCI EM Index. You cannot invest directly in an index.

    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 & 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.


    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.

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