Investment Commentary –December 7th, 2016

Market Indices as of Market Close December 7th, 2016
Dow 19,549 (12.19% YTD)
S&P 2,241 (9.66% YTD)
NASDAQ 5,393 (7.72% YTD)
Gold $1,173 (52 Week Low $1,055 High $1,387
US 10Y Treasury 2.42 52 Week Low 1.32 High 2.49

Dow, S&P close at records

U.S. stocks had another banner session on Wednesday as the Dow Jones Industrial Average, S&P 500 and small-cap Russell 2000 closed at record highs. The Dow DJIA, +1.55% gained 297.84 points, or 1.5%, to 19,549.62 with Nike Inc. NKE, +3.03% and Home Depot Inc. HD, +2.89% leading the blue-chip benchmark higher to its third consecutive record close. The S&P 500 SPX, +1.32% climbed 29.08 points, or 1.3%, to 2,241.32, as real-estate and telecommunications shares led the index higher. The Nasdaq Composite COMP, +1.14% rose 60.76 points, or 1.1%, to 5,393.76, closing just a few points below its all-time high. The Russell 2000, the small-cap index, advanced 12.62 points, or 0.9%, to 1,365.30. Stocks rallied sharply since President-elect Donald Trump’s unexpected victory in the Nov. 8 U.S. election, with the main benchmarks recording a series of new record highs. Investors believe that Trump’s proposed fiscal policies, including a massive infrastructure spending plan and corporate tax cuts, will stoke economic growth and boost corporate profits.

JP Morgan Weekly Brief: The prospect of tax cuts and infrastructure spending in the US have increased expectations of higher US inflation and a slightly faster pace of US Federal Reserve rate rises. As a result, US Treasury 10-year yields have risen around 0.5% since the election. The rise in bond yields has had important implications for the performance of equities, within which there has been a huge sectoral shift. Investors have moved away from defensive ‘bond proxy’ stocks, such as utilities, and into stocks which benefit from higher rates, such as banks. If yields continue to rise then this trend could have further to run

Finance 101 Q&A: Dow Jones explained

Q. What is the Dow Jones industrial average?
A. The Dow, the oldest continuing U.S. market index, is a way to measure the combined stock values of 30 big U.S. companies.
It started out with 12 components, including now-defunct companies like U.S. Leather and Tennessee Coal, Iron and Railroad. The only original component still around is General Electric.
The index has expanded to reflect the U.S. economy’s move away from big industrial companies. Staples of the modern Dow include big financial companies like Citigroup, technology bellwether IBM and drug manufacturer Pfizer.

Q. Is the Dow considered a good measure of how the nation’s companies are generally faring in the stock market?
A. Yes and no. Some on Wall Street downplay the importance of the average because it isn’t as broad a measure as counterparts like the Standard & Poor’s 500 index, which reflects the performance of 500 companies’ stocks.
Still, the Dow is the granddaddy of U.S. market indexes, and it offers a relatively easy-to-understand snapshot of how the market is faring. Analysts generally believe it is a useful tool when combined with other market indicators, including the S&P 500 and the Nasdaq composite, an index of shares on the tech-heavy Nasdaq Stock Market.
*The DOW 30 does not include bonds, it is 100% comprised of stocks.

Pearl Harbor Hits:
Upon receiving news of the attacks on Pearl Harbor the DOW falls 4.08 points as traders panic.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.

Click to access GTTM%20Weekly%20Market%20RECAP%20[MKR]%20[LU_EN].pdf