U.S. Stock and Oil Prices Stick Together BUT Decouple from China03-02-2016 |
Sources: Equity Market, Fixed Income and REIT returns from JP Morgan as of 02/26/16. Rates and Economic Calendar Data from Bloomberg as of 02/26/16.
U.S. equity markets capped off a second consecutive week of gains, inching closer to their end of 2015 levels on the back of a decoupling between U.S. stock and oil prices from the Chinese stock market. This decoupling could mark a significant shift in market sentiment and we are anxious to see if U.S. stock prices will eventually decouple from oil prices in the future as well. Last week the S&P 500 Index gained 1.6% and WTI Oil gained 10.6%, while the CSI 300 Index (measuring the performance of China’s mainland stock exchange) fell 3.4%. The S&P 500 Index is now down 4.3% for 2016, 6.5% higher than the nearly two year low of 1829 reached on February 11, 2016 – a level not seen since April 11, 2014.
In terms of the different market capitalizations, last week’s returns were fairly well balanced with both Small and Mid-cap U.S. stocks gaining approximately 2.7% each. When looking at year-to-date returns, however, the divergence in performance across Large, Mid and Small cap stocks is clearly defined. Mid- cap stocks, as measured by the Russell Mid Cap Index, finished last week down 5% for the year while Small cap stocks, as measured by Russell 2000 Index, were down 8.5%, nearly twice as much as the larger cap stock returns referenced above.
Earnings season is all but completed with 96% of S&P 500 components having reported 4Q earnings, but a busy week of economic data awaits investors as the monthly employment situation is set for release on Friday. This report will help market participants weigh the prospects of additional interest rate hikes by the Federal Reserve this year as the unemployment rate currently sits at 4.9% – in line with the FOMC’s longer run projections. How will the unprecedented confluence of low economic growth and the potential for additional hikes in the Federal Reserve’s target federal funds rate impact your portfolio? Speak with your Hennion & Wash Financial advisor or a member of the Hennion & Walsh Asset Management team to have a portfolio diagnostic completed and help understand your exposure to these risks.
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.
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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.
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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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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.