Investment Commentary – January 7th, 2016
Market Indices as of Market Close January 7th, 2016
Dow 16,906 (-4.11% YTD)
S&P 21,990 (-3.92% YTD)
NASDAQ 4,758 (-5.16% YTD)
Global Dow 2,218 (2,203 52 week low /2,644 high)
10-year Treasury 2.17 (1.64 52 week low /2.50high )
Gold 1,091 ($1,045 52 week low /high $1,306)
Oil $33.97 ($32.10 52 week low /high $65.50)
Thought of the week
As we kick off 2016, it is worth taking a look back at 2015 to address some of the major market themes that led to considerable return dispersion across asset classes. Emerging market equities and commodities both struggled, as a seemingly unstoppable rise in the U.S. dollar and fears of a global growth slowdown that was “Made in China” weighed on returns. Turning to U.S. equities, large cap companies outperformed their small cap counterparts, but both experienced heightened levels of
volatility in the second half, finishing the year essentially at the same place they began. Outside of the U.S., the strength of the dollar weighed on returns for U.S.-based investors, with developed market equities up slightly due to decent returns out of Japan but mixed returns in Europe and the U.K. Finally, after casting a shadow over markets for the better part of 2015, the Federal Reserve raised interest
rates in December for the first time in 9 years. However, with the exception of U.S. high yield, which suffered due to weakness in the broader energy complex, fixed income markets finished the year flat as investors opted for safe-haven investments due to rising volatility across risk assets. While it is easy to become frustrated in the wake of a year where performance was largely driven by macro headwinds and uncertainty, it is important for investors to remember to stay invested for the long run and that these storms are best weathered with a diversified portfolio.
Consumer confidence rises in December
The last week of the year included the release of several economics reports. The Conference Board’s consumer confidence index rose in December after a moderate decrease in November, and home prices rose more than expected in October, according to the Case-Schiller index. However, those reports were offset by some negative indicators, including a drop in the ISM-Chicago manufacturing survey’s general business barometer to a 6½-year low. In addition, pending home sales dropped in November, the third decrease in the past four months, and initial jobless claims jumped 20,000 to 287,000 for the week, the highest level since July. The number remains low by historical standards, though, and readings are often volatile during holiday weeks.
T. Rowe Price’s Eiswert sees Fed rate increase as bullish signal
Investors need to be more selective in picking stocks after the run-up in equity prices over the past few years, said David Eiswert, portfolio manager of the T. Rowe Price Global Stock Fund, in an interview with Barron’s. “But we don’t see a compelling reason for a recession,” he said. “As the Fed raises interest rates it is a sign of confidence for the U.S. economy. I think that is the thing that everyone is missing. The road to normalization is actually bullish.”
THIS DAY IN FINANCIAL HISTORY
January 7th, 1992: Less than 15 months after closing above 500 for the first time, the NASDAQ Composite Index breaks the 600 barrier, finishing the day at 602.29.
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.