Investment Commentary – May 18th, 2016
Market Indices as of Market Close May 18th, 2016
Dow 17,526 (0.58% YTD)
S&P 2,047 (0.180% YTD)
NASDAQ 4,739 (-5.36% YTD)
Global Dow 2,291 (2,033 52 week low /2,644 high)
10-year Treasury 1.85 (1.53 52 week low /2.50 high)
Gold 1,259 ($1,047 52 week low /high $1,306)
Oil $47.89 ($30.79 52 week low /high $65.24)
U.S. stocks little changed as the Fed minutes fuel fears of June hike
U.S. stocks were little changed with the S&P 500 fractionally up Wednesday after the Federal Reserve minutes showed that policy makers are keeping their options open to hiking interest rates in June.
The minutes of the April 26-27 Federal Open Market Committee meeting also suggested that officials are concerned that the markets are too complacent over the Fed’s stance on tightening the monetary policy. S&P 500 SPX, +0.02% added less than a point to close at 2,047 and the Nasdaq COMP, +0.50% gained 23 points, or 0.5%, to close at 4,739 while the Dow Jones Industrial Average DJIA, -0.02% shed 4 points to finish at 17,526.
BlackRock Insight: Into thin air?
As markets appeared to stumble on their grind upward, investors are wondering if we can still climb higher – or if it’s time to seek shelter from storms on the horizon. Our experts share their thoughts.
Mountain climbers converge on Mount Everest each May, when weather conditions offer a window of opportunity to attempt a summit. But sudden storms still can—and do—appear, defeating even the most experienced and fit climbers. At times, they must make quick judgments at high altitudes about whether to proceed. Similarly, as markets appeared to have stumbled on their grind upward, investors are wondering if we can still climb higher, or if it is time to seek shelter from storms on the horizon.
Our key views: Stabilizing growth, a slower pace of rate increases by the Federal Reserve (Fed) and a pause in the U.S. dollar’s rise bode well for markets in the near term. But future returns are likely to be more muted and we expect more volatility ahead. Meanwhile, monetary policy divergence—a key driver of the dollar’s gains—looks to be slowing, with the Eurozone and Japan reaching the limits of negative interest rates, and the Fed signaling a slower pace of rate increases.
The rebound of stocks since February may feel a bit long in the tooth, but it is important to remember: U.S. economic growth remains strong enough to ease fears of a recession, but not so robust that the Fed will increase rates too fast or too soon. Still, disappointing earnings weigh on the market and point to lower stock returns—and a bumpier ride—ahead. Overall, however, conditions are right to continue to favor U.S. stocks. For investors with more appetite for risks, emerging markets appear enticing, but selectivity is key.
Fed signals interest rate hike firmly on the table for June
Federal Reserve officials felt the U.S. economy could be ready for another interest rate increase in June, according to the minutes from the central bank’s April policy meeting released on Wednesday.
Most participants in the policy-setting committee’s April 26-27 meeting said they wanted to see signs that economic growth was picking up in the second quarter and that employment and inflation were firming, the minutes showed.
“Then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June,” according to the minutes.
THIS DAY IN FINANCIAL HISTORY
May 15, 1938: U.S. Begins Anti-Counterfeiting Campaign
The campaign, called “Know Your Money,” was created to raise awareness about legal currency and warn of the increasing problems with counterfeiting activities, which were undoubtedly spurred by the looming depression.
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.