Weekly Commentary, 12/5/16 to 12/9/16
After taking a brief breather stocks resumed their rally for the same reasons we have been writing about post-election. Higher stock prices seem to be pinning their hopes on Trump’s hoped for success in stimulating domestic economic grow. The major indexes rallied to new all-time highs. Both the Dow Jones Industrial Average and the S&P 500 Index added 3% while the smaller cap Russell 2000 Index spiked 5.60%. The Dow Jones rests only 1% from the psychologically important level of 20,000.
Financial stocks have been leading the market higher, and it could get another boost next week as the Federal Open Market Committee meets. At this meeting, they are expected to raise interest rates for the second time in a year. Investors will look for any clues as to the path of rates in 2017. 10-year U.S. Treasury yields leaked higher to 2.46%, approaching the critical 2.50% last seen June 2015. We will soon see if 2.50% is enough yield to attract demand for risk free 10-year debt versus dividend stocks with similar yields.
International shares posted strong gains in what could have been a troubling week. Monday the euro rallied following Italy’s vote to reject constitutional changes that would raise concerns over the survival of the euro amid diverging economies. Thursday the European Central Bank announced it would extend its bond buying program albeit at a slower pace. The Euro Stoxx 600 gained 4.70% and the German Dax added 6.50%.
Although the U.S. has been leading the global markets higher it is encouraging to see the international markets improving as well. Although the MSCI All Country World Index (ACWI) has yet to establish new all-time highs, it is getting close. The underlying market breadth continues to support the positive price action. The S&P 500 advance-decline is setting record highs. 31% of S&P 500 stocks hit new highs versus only 2% making new lows.
Both the economic fundamentals and the market’s technicals support the recent move to new highs. We will enjoy the ride while we can but our focus will remain on our disciplined investment processes.
Past performance is no guarantee of future results. Investments are subject to risk, and any of Stadion’s investment strategies may lose money. The investment strategies presented are not appropriate for every investor and financial advisors should review the terms and conditions and risks involved. Stadion’s actively managed portfolios may underperform during bull markets. Some information contained herein was prepared by or obtained from sources that Stadion believes to be reliable. There is no assurance that any of the target prices or other forward-looking statements mentioned will be attained. Any market prices are only indications of market values and are subject to change. The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock price. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DAX is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The EURO STOXX 600 Index represents large, mid and small capitalization companies across 18 countries of the European region. The MSCI ACWI Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. It is not possible to invest directly in indexes (like the S&P 500) which are unmanaged and do not incur fees and charges. The U.S. 10-Year Treasury Note is a debt obligation issued by the United States government that matures in 10 years. The Sharpe ratio measures the excess return per unit of deviation, or risk. The core personal consumption expenditures index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices. Any references to specific securities or market indexes are for informational purposes only. They are not intended as specific investment advice and should not be relied on for making investment decisions.
Past Performance is no guarantee of future results. Investments are subject to risk, and any of Stadion's investment strategies may lose money.