Market Overview
Sources:Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 09/27/19. Rates and Economic Calendar Data from Bloomberg as of 09/27/19. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.
Happening Now
Global equity markets finished in the red last week after a choppy trading session. In the U.S., the S&P 500 Index fell to a level of 2962, representing a loss of 0.98%, while the Russell Midcap Index gave back 1.09% for the week. The Russell 2000 Index, a measure of the Nation’s smallest publicly traded firms, was again a laggard for the second consecutive week give up 2.45%. On the international equities front, developed and emerging markets also returned -0.62% and -1.86% respectively. Domestic fixed-income securities advanced amid the volatility, with the exception of the High Yield sector, and the 10-year U.S. Treasury yield closed out the week at 1.69%.
Investors were tasked last week with processing updates that were largely negative. European manufacturing data was weak, the Richmond Fed’s Manufacturing Index came in lower than expected, and consumer confidence declined to a degree. Positive trade updates (particularly between the U.S. and China) however buoyed the markets from further potential declines. The biggest news, however, came out of Washington as House Speaker Nancy Pelosi announced a formal impeachment inquiry of President Trump.
After the initial announcement of the inquiry, markets moved lower and we saw trends pointing to a minor shift to safety (e.g. gold prices rose). However, since then market reaction has been relatively subdued overall with investors focus seemingly turning to other areas such as trade updates, economic data releases and the beginning stages of third quarter earnings season. At this time, we believe that third quarter earnings and GDP results will remind us that the U.S. economy is indeed “slowing, but growing”, and we feel that this theme is likely to continue through at least the first half of 2020.
Given all of the geopolitical uncertainties across the globe, we encourage investors to stay disciplined and work with experienced financial professionals to help manage their portfolios through various market cycles within a well-diversified framework that is consistent with their objectives, time-frame and tolerance for risk.
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 REITs that primarily own and operate income-producing real estate.
