Investment Commentary – February 17th, 2016

Market Indices as of Market Close February 17th, 2016

Dow   16,454 (-5.57% YTD)
S&P 1,927 (-5.73% YTD)
NASDAQ   4,534 (-9.45% YTD)
Global Dow 2,159 (2,033 52 week low /2,644 high)
10-year Treasury 1.82 (1.53 52 week low /2.50 high)
Gold 1,210 ($1,047 52 week low /high $1,239)
Oil $31.20 ($26.05 52 week low /high $65.69)

U.S. stocks post first 3-day winning streak since December

U.S. stocks finished higher for the third session in a row, after the minutes of the Federal Reserve’s January policy meeting suggested that policy makers expressed the need for additional information about the strength of the economy before making any further attempts to raise interest rates in 2016. This is the first three-day winning streak for the main benchmarks since Dec. 23. The S&P 500’s energy sector led the gains, jumping 2.9%, following a 5.6% rally in oil futures. The S&P 500 SPX, +1.65% finished 31 points, or 1.6%, higher at 1,926. The Dow Jones Industrial Average DJIA, +1.59% finished 257 points, or 1.6%, higher at 16,453. The Nasdaq Composite COMP, +2.21% finished 98 points, 2.2%, higher at 4,534.

JP Morgan Thought of the Week

Being invested in equities so far this year has been far from smooth sailing, with the sharp decline in prices and elevated levels of volatility prompting many investors to reconsider the role of equities in their portfolios. While stocks have fallen, further easing by major central banks and worries about the outlook for corporate profits and the economy have depressed bond yields to levels last seen at the beginning of 2015. However, with prospective returns from government bonds clearly limited by the low level of rates, it is worth considering what the sell-off in equities implies for future returns. Historically, valuation has not been a great predictor of returns over the coming year, however, over a longer time horizon, forward P/E ratios and returns have tended to have a much stronger relationship. The recent sell-off has pushed both prices and valuations to levels that, looking over a 5-year time horizon, have historically been correlated with higher returns for equities than if stocks were purchased at higher valuations. Thus, while stocks could move lower before they move higher on the back of elevated volatility and legitimate concerns about energy and manufacturing, current valuations in the equity market may actually represent an opportunity for long-term investors.

IRA Season: Fund One If You Can before It’s too late

As April 15 approaches, the window is closing on the opportunities for advisors to capture both 2015 and 2016 IRA contributions.

Remember: Virtually anyone with a reportable earned income is eligible to fund an IRA; earned income is the sole requirement. Also worth repeating is that investors can still fund IRAs for 2015 through April 15, 2016.

IRA eligibility requirements differ; all income-earning investors younger than 70½ are eligible to fund a nondeductible (aftertax) IRA, regardless of the amount of their income. But both IRAs funded with deductible (pretax) contributions, and Roth IRAs, impose income limits.

A number of variables apply in order to determine whether a taxpayer is eligible to make a deductible IRA, including filing status, modified adjust gross income (MAGI), and whether individuals and/or their spouses are active participants in a workplace retirement plan.

For example, single taxpayers not covered by a workplace retirement plan may deduct their entire contributions to traditional IRAs, regardless of their income. But for married couples filing jointly, if one spouse is participating in a workplace retirement plan, nonparticipating spouses may deduct their full contributions to a traditional IRA if the couple’s joint income is $184,000 or less in 2016. A partial deduction is allowed if the couple’s income is above $184,000, but does not exceed $194,000.


February 17th, 1874: Thomas J. Watson is born in Campbell, NY. After working as a bookkeeper, an itinerant peddler of musical instruments, and a salesman for NCR, he becomes the dynamic head of IBM who helps computerize the modern world. His famous motto, THINK, is shortened from his favorite remark, I didn’t think has cost the world millions of dollars.

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 investment strategy.