Stocks Higher as 2016 Finish Line Approaches
Sources: Equity Market and Fixed Income returns are from JP Morgan as of 12/23/16. REIT, Rates and Economic Calendar Data from Bloomberg as of 12/27/16.
Stocks finished last week marginally higher on low volume as many traders started their holiday vacations early. On the domestic front, the S&P 500 Index gained 0.35%, Mid-cap1 stocks gained 0.2% and Small cap2 stocks saw a 0.6% increase. Internationally, developed markets3 gained 0.4% while emerging markets4 fell 1.7%. In terms of sector performance in the U.S., Telecom was the best performing group for the week moving up in price by 2.4% while Energy lagged, losing 0.3%.
The third estimate of U.S. gross domestic product (GDP) for the 3rd quarter of 2016 was released on Thursday and showed that the economy expanded at a 3.5% rate, up from the previous estimate of 3.2%. The Fed’s preferred measure of inflation; the U.S. Core Personal Consumption Expenditure (PCE) index, accompanied the GDP release on Thursday and was unchanged, a reading below the consensus estimates which called for a gain of 0.1%. Housing data from last week surprised to the upside as existing home sales rose 0.7% in November, an increase of over 15% relative to November 2015. Additionally, new homes sales posted a 5.2% gain during November, the second highest reading since the 2008-2009 financial crisis, according to Bloomberg.com.
U.S. markets are now poised to finish the year in positive territory, outpacing most strategists’ 2016 forecasts of singled digit gains. International stocks are set to finish the year with mixed results while not being able to keep up with the end of year surge that took place within U.S. stock markets. Given the long list of events that are set to likely unfold in 2017, investors would be wise, in our view, to revisit their asset allocation positioning and ensure they are investing with purpose and consistent with their goals and tolerances for risk. If you would like help understanding how you are invested or if you would like to work with our Financial Planning Team in order to help define your overall financial objectives, please do not hesitate to speak with a Hennion & Walsh Financial Advisor or a member of the Hennion & Walsh Asset Management Team.
Best wishes for a very happy and healthy New Year to all!
The following indexes were used to represent asset class returns: 1Mid cap stocks- Russell Mid cap Index. 2Small Cap stocks – Russell 2000 Index. 3Developed markets – MSCI EAFE Index. 4Emerging Markets – MSCI EM 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.