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by Leif Hagen
by Leif Hagen
Thursday, September 17, 2015
Monday, September 14, 2015
Will the Federal Reserve begin to raise rates this week?
Weekly Market
Commentary
September 14,
2015
The Markets
The market is
as streaky as a slice of bacon.
U.S. stock markets have been sliding higher. They’ve
been sliding lower.
Barron’s
reported the Standard & Poor’s 500 Index has tumbled from gains to losses
and back again for 10 weeks in a row. The Dow Jones Industrial Index has tagged
along with nine weeks of flip-flops. You’d almost think they were running for
office.
There are market optimists. There are market pessimists.
The American Association of Individual Investors
(AAII) weekly survey of investor sentiment reported 34.6 percent of
respondents were bullish. That’s up from the previous week. Thirty-five percent
of respondents were bearish. That’s also up from last week. What’s down?
Neutral sentiment. More people are forming opinions about the possible
direction of the market.
There are questions that need to be answered.
Will the Federal Reserve begin to raise rates this
week? Some say yes. Some say no. Barron’s said it’s too close to call. There
is no clear consensus, Fed officials have given mixed signals, and the bond
market has not priced in a rate hike. If the Fed does raise rates, experts
cited by Barron’s said markets could
get ugly for a little while or they could remain calm. A lot depends on the
wording of the Fed’s statement.
Have Chinese markets stabilized? MarketWatch reported the Shanghai Composite Index finished last
week higher. It was the first positive weekly outcome in a month. Chinese
authorities, once again, are taking steps to stabilize markets. The Economist offered this thought, “As
China’s financial markets develop, its stock market will become less bumpy. For
now, investors must remember that many things are bigger in China, including
the daily ups and down of its stock market.”
Will the U.S. government shut down again? It’s in the hands of our elected officials.
Data as of 9/11/15
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
2.1%
|
-4.8%
|
-1.8%
|
11.0%
|
12.1%
|
4.7%
|
Dow Jones Global ex-U.S.
|
1.8
|
-7.2
|
-14.1
|
1.7
|
0.8
|
1.2
|
10-year Treasury Note (Yield Only)
|
2.2
|
NA
|
2.5
|
1.7
|
2.8
|
4.2
|
Gold (per ounce)
|
-1.6
|
-8.3
|
-11.4
|
-14.1
|
-2.4
|
9.4
|
Bloomberg
Commodity Index
|
0.5
|
-14.8
|
-26.9
|
-15.7
|
-8.3
|
-6.1
|
DJ Equity
All REIT Total Return Index
|
2.2
|
-7.0
|
0.2
|
7.2
|
10.8
|
6.3
|
S&P 500, Dow Jones Global
ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends
(gold does not pay a dividend) and the three-, five-, and 10-year returns are
annualized; the DJ Equity All REIT Total Return Index does include reinvested
dividends and the three-, five-, and 10-year returns are annualized; and the
10-year Treasury Note is simply the yield at the close of the day on each of
the historical time periods.
Sources: Yahoo! Finance,
Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no
guarantee of future results. Indices are unmanaged and cannot be invested into
directly. N/A means not applicable.
Are we seeing the big picture? It’s safe to say many people are worried about whether
economic growth – in the United States and abroad – will be stifled by changing
monetary policy in the United States. As a result, all eyes have been on the
Federal Reserve, which is expected to begin raising the Fed funds rates
sometime soon.
However,
the Federal Reserve’s monetary policy isn’t the only game in town. Fiscal
policy – the actions taken by our government – can also have a profound effect
on economic growth. A July Brookings’
blog post ‘Fiscal Headwinds are Abating,’ reported:
“Tight
fiscal policy by local, state, and federal governments held down economic
growth for more than four years, but that restraint finally appears to be over…
Fiscal policy is no longer a source of contraction for the economy, but neither
is it a source of strength.”
The
blog post discusses the reasons that government spending has held back economic
growth. At the federal level, contraction was attributed to “…tight caps on
annually appropriated spending and the automatic spending cuts known as
sequestration.” The organization’s Federal Impact Measure (FIM), which
estimates the effect of federal, state, and local spending (and taxes) on gross
domestic product growth, suggests federal spending caused economic growth to be
0.35 percentage points lower per year, on average, between 2011 and 2013.
There
is talk of a government shutdown at the end of September. If it happens, it
could have an effect on economic growth. The last time the government shut down
was in 2013. Experts cited by the BBC
reported the 2013 shutdown cost the U.S. economy about $24 billion and reduced quarterly
economic growth by 0.6 percent. That shutdown lasted 16 days.
It
is possible economic growth may slow for some period of time. It’s also possible
monetary policy, fiscal policy, and other factors may be responsible.
Weekly Focus – Think About It
“My best friend is the man who in wishing
me well wishes it for my sake.”
--Aristotle, Greek philosopher
Best regards,
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LP Financial Advisor
Securities
offered through LPL Financial Inc.,
Member
FINRA/SIPC.
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* This newsletter was
prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with
the named broker/dealer.
* The Standard & Poor's
500 (S&P 500) is an unmanaged group of securities considered to be
representative of the stock
market in general. You cannot invest directly in this index.
* The Standard & Poor’s
500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect
fees,
expenses, or sales charges.
Index performance is not indicative of the performance of any investment.
* The 10-year Treasury Note
represents debt owed by the United States Treasury to the public. Since the
U.S.
Government is seen as a
risk-free borrower, investors use the 10-year Treasury Note as a benchmark for
the long-term bond market.
* Gold represents the
afternoon gold price as reported by the London Bullion Market Association.
The gold price is set twice
daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in
U.S. dollars per fine troy ounce.
* The Bloomberg Commodity
Index is designed to be a highly liquid and diversified benchmark for the
commodity futures market. The Index is composed of futures contracts on 19
physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT
Total Return Index measures the total return performance of the equity
subcategory of the Real Estate Investment Trust (REIT) industry as calculated
by Dow Jones.
* Yahoo! Finance is the
source for any reference to the performance of an index between two specific
periods.
* Opinions expressed are
subject to change without notice and are not intended as investment advice or
to predict future performance.
* Economic forecasts set
forth may not develop as predicted and there can be no guarantee that
strategies promoted will be successful.
* Past performance does not
guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly
in an index.
* Consult your financial
professional before making any investment decision.
* Stock investing involves
risk including loss of principal.
* To unsubscribe from the
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Sources:
http://www.barrons.com/articles/u-s-stocks-rise-2-1-ahead-of-federal-reserve-meeting-1442036643?mod=BOL_hp_we_columns (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-14-15_Barrons-US_Stocks_Rise_2.1_Percent_Ahead_of_Federal_Reserve_Meeting-Footnote_1.pdf)
http://www.barrons.com/articles/barrons-fed-rate-hike-too-close-to-call-1442036635 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-14-15_Barrons-Fed_Rate_Hike_is_Too_Close_to_Call-Footnote_3.pdf)
http://www.economist.com/blogs/freeexchange/2015/08/chinas-stockmarket-0 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-14-15_TheEconomist-Was_the_Crash_that_Big-Footnote_5.pdf)
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