Nuveen Asset Management
Commentary
As Equity Prices Rise, Downside Risks Mount
U.S. equities advanced yet again last week with the S&P 500 Index climbing 0.7%. Economic data continued to come in better than expected. Consumer confidence reached its highest level since 2001 last month while the ISM non-manufacturing index, which measures business activity and employment trends, showed its strongest reading since late 2015.
Commentary
We Are Growing Less Positive (But Not Negative) Toward Equities
Equity markets have increased since the U.S. elections for two principal reasons: optimism over a pro-growth legislative agenda from Donald Trump and improving U.S. and global economic and earnings growth.
Commentary
The Equity Rally Should Persist, but Expect Bumps
As has been the case for the past couple of months, investors continued to be highly attuned to the political backdrop last week. Early in the week, concerns over the president’s immigration and trade policies cased unease, but sentiment improved on Thursday after Donald Trump signaled a near-term announcement on tax reform.
Commentary
2016 Recap and a Look Ahead to 2017
When we made our predictions in January, a key theme was that 2016 would be a year that would frustrate both the bulls and the bears.
Commentary
The Post-Election Rally May Be Losing Steam
U.S. equities finished mostly lower last week, with the S&P 500 Index down 0.9%. Rising interest rates and the climbing U.S. dollar weighed on sentiment, and investors started turning from broad hopes of fiscal stimulus and tax reform to wondering about specifics.
Commentary
Equity Prices Falter in Advance of the Elections
Last week saw a clear risk-off trend, as U.S. political uncertainty rose in advance of this week’s elections.
Commentary
Investors Await Election and Fed Rate Outcomes
U.S. equities moved slightly higher last week, with the S&P 500 Index climbing 0.4%.1 Corporate earnings results were solid, while data showed economic stabilization in China. Investors also reacted positively to high-profile mergerand-acquisition news.
Commentary
If Earnings Turn Positive, Equities Should Follow
U.S. equities retreated last week, with the S&P 500 Index declining 1.0%.1 Sentiment was dragged down by negative earnings updates, a disappointing trade report from China and rising U.S. political turmoil.
Commentary
What Factors Will Drive Equities from Here?
During the height of the financial crisis, the Federal Reserve and other central banks stepped in to stave off complete global financial catastrophe. In the ensuing recovery, monetary policy has remained extremely accommodative and been largely responsible for an equity bull market that is nearly eight years old.
Commentary
Future Equity Gains May Require Earnings Improvements
U.S. equities climbed once again last week thanks to a Friday rally. The S&P 500 Index climbed 0.2% for the week. The first presidential debate dominated
discussion early in the week, and investors focused on what Deutsche Bank’s capitalization issues could mean for the global banking system.
Commentary
Equities Appear More Attractive than Other Asset Classes
U.S. equities experienced a volatile week, as monetary policy dominated the headlines. Dovish comments from Federal Reserve officials tamped down speculation that the central bank was on course to tighten aggressively.
Commentary
Monetary Policy Uncertainty Disrupts Equity Markets
U.S. equities were relatively quiet last week before falling sharply on Friday, as the S&P 500 Index declined 2.4% for the week. Global sovereign bond yields
also spiked on Friday.
Commentary
Investor Confidence Is Slowly Improving
Equity markets have been trendless and little changed over the past month.
Stocks drifted lower last week, with the S&P 500 Index falling 0.7%. The main
economic event was Federal Reserve Chair Janet Yellen’s speech at Jackson
Hole on Friday, where she indicated rate hikes were looking more likely.
Commentary
The Bullish Case Is More Compelling Than the Bearish
Most financial market developments occurred outside of equity markets last
week. The U.S. dollar came under pressure following a generally dovish tone
from the July Federal Reserve policy meeting minutes.
Commentary
The Slow Growth Race Seems Undeterred for Now
U.S. equities were primarily unchanged last week and have moved mostly
sideways for the last few weeks. The positive surprise in the July jobs report
had sparked discussion that the Federal Reserve would raise interest rates
in the near-term, but softer-than-expected U.S. economic data somewhat
dampened expectations.
Commentary
Despite Lackluster Growth, Equities Remain Attractive
There were a number of events for markets to react to last week, including decisions by the Bank of England and Bank of Japan to enact new stimulus programs, sharp polling shifts in the U.S. presidential election and further decent corporate earnings results. U.S. stocks rose last week, with the S&P 500 Index climbing 0.5%.1 The technology sector saw particularly impressive earnings results and climbed 1.5%. In contrast, most other markets around the world were flat or down.
Commentary
Equities Settle Down After an Extended Rally
Equity markets digested a great deal of information last week. Corporate
earnings continued to improve (particularly in the technology sector) and
the U.S. dollar and oil prices declined. The Federal Reserve acknowledged
financial risks have been diminishing, as the economy appeared to stabilize.
Commentary
Confidence About the Global Economy Is Improving
U.S. equities notched a fourth week of gains with the S&P 500 Index climbing
0.6%. The primary forces behind the rally remain better-than-expected
corporate earnings, stability in the banking sector and a growing sense that
equities appear more attractive than bonds given low Treasury yields. In our
opinion, the main risk to equities is a possible spike in bond yields. Despite an
improving economy and growing prospects for an additional rate hike by the
Federal Reserve, however, we think such an event is unlikely.
Commentary
Equities Reach New Highs as Confidence Improves Modestly
The S&P 500 Index advanced 1.5% last week, marking the third straight
week in which U.S. stocks advanced more than 1%.
We attribute the recent rally to three factors: 1) A growing realization that equities are more attractive
than bonds, given low Treasury yields; 2) An improving corporate earnings
outlook for the next 12 months; and 3) A sense that Brexit risks should be
relatively well contained thanks in part to stability in the banking system.
Commentary
Equities May Struggle, but Should Outperform Other Asset Classes
Last week started on a horrific note with the massacre in Orlando. That event
and growing anxiety over the possible U.K. exit from the European Union (the
Brexit) dragged down investor sentiment. The S&P 500 Index fell 1.1% last
week. Financials came under pressure, while the more defensive telecom and
utilities sectors bucked the broader trend and gained ground. Non-U.S. stocks
fared even worse, with European markets declining around 2% and Japanese
stocks dropping over 3%.
Commentary
The Intermediate Outlook Is Brighter Than the Near-Term
Equity markets were mixed last week, rising in the first half of the week before
declining. Signs of stabilization in China and a lower likelihood of near-term
Federal Reserve tightening helped markets, while economic growth worries,
the upcoming referendum in England to determine whether to remain a part
of the European Union (the “Brexit” vote) and falling bond yields weighed on
stocks. For the week, the S&P 500 Index declined a modest 0.1%.
Commentary
Despite Uncertainty, Market Conditions Should Improve
A number of events drove investor behavior last week, including an
announced delay in implementing a new sales tax in Japan, European
Central Bank and OPEC meetings and a highly disappointing U.S. jobs
report. Despite all of the activity, however, the S&P 500 Index was virtually
unchanged for the week.
Commentary
Equities Show More Positive Than Negative Signs
Early in 2016, financial markets were dominated by a negative feedback loop.
Chinese economic conditions were deteriorating, which drove fears of global
deflation. Oil prices fell as a result, which put downward pressure on credit markets,
the banking system and the broader global economy. Those trends have recently
started to reverse. Confidence in the global economy is growing, oil prices are rising
and stabilizing, worries about Chinese currency devaluation are receding and credit
markets appear healthier.
Commentary
Economic Growth and Inflation Are Both Moving Higher
U.S. equities were mixed last week. The S&P 500 Index snapped a three-week losing streak and climbed 0.4%, while the Dow Jones Industrial Average was down fractionally.1 The biggest story last week was a growing sense that the Federal Reserve might begin raising interest rates sooner than previously anticipated. Corporate earnings were also in focus, with retailers continuing to show poor results.
Commentary
Long-Term Positives Outweigh Negatives for Equities
The S&P 500 Index fell 0.4% last week, although it remains in positive territory
for the year. The retail sector was a heavy focus last week as earnings results
were broadly disappointing. The cancellation of the Staples/Office Depot
merger also caused sentiment to sour on retailers. The rally in the U.S. dollar
continued, as U.S. growth continues to outpace most of the rest of the world.
Oil prices rallied while most industrial metals were lower.
Commentary
The Global Economy Remains Soft, But Appears to Be Healing
The S&P 500 Index slipped 0.3% last week, is down about 3% from its recent high and is in marginally positive territory for the year. Economic growth concerns came to the forefront due to the relatively weak April jobs report. Politics also received increased attention as Donald Trump solidified his position as the presumptive Republican nominee. Commodity-related segments of the market came under pressure, while consumer staples and utilities outperformed.
Commentary
The Economy and Earnings Should Strengthen Later This Year
Equity markets fell last week, with the S&P 500 Index declining 1.2%. Monetary
policy was in focus. The Federal Reserve meeting generated debate about the
timing of the next rate hike and the Bank of Japan surprisingly failed to move
rates even further into negative territory. Earnings were generally weak, while a
fall in the value of the dollar led to another rally in commodity prices.
Commentary
Earnings Remain Key to Equity Forecast
Equities climbed yet again last week, with the S&P 500 Index rising 0.5%.
Corporate earnings were mixed, and the biggest market story was ongoing
strength in commodities, particularly oil and metals. Bank stocks rallied
strongly for a second week, while defensive market segments struggled to
keep pace.
Commentary
Strong and Comprehensive Oversight the Best Remedy for Puerto Rico’s Fiscal Ills
Puerto Rico’s recent enactment of a controversial debt moratorium statute ahead of large debt service payments due in May and July is evidence the territory’s fiscal crisis is coming to a head. We believe an orderly, fair and transparent resolution to the situation in Puerto Rico is best for all bondholders, the broader municipal market and the people of Puerto Rico. This is best accomplished through Congressional intervention in the form of a strong oversight board, a framework that encourages negotiation between Puerto Rico and creditors and a process for the renegotiation of all of the Commonwealth’s obligations.
Commentary
Expect Economic and Market Improvements Later in 2016
The uneven market uptrend in place since mid-February resumed last week,
with the S&P 500 Index climbing 1.7%. The primary catalyst appeared to be
better-than-expected corporate earnings results in the still-early reporting
season, particularly from the banking sector. As a result, bank stocks
performed particularly well, rising 7% last week, marking the best weekly gain
in over four years. Investors also focused on better economic data coming
from China and ongoing evidence that the U.S. economy is growing slowly.
Commentary
Potential Earnings Improvements Remain a Critical Catalyst
Equity markets retreated last week amid multiple crosscurrents as the S&P 500
Index fell 1.2%. Currency and commodity markets were in focus. The soaring
value of the yen complicated the Bank of Japan’s interest rate decisions, while
oil prices rose sharply on expectations for improved global economic growth
and a possibility of production cuts. Investors also focused on the regulatory
environment, as the Treasury Department rolled out restrictive rules governing
corporate inversions.
Commentary
The Positives Outweigh the Negatives for the U.S. Economy
The U.S. equity rally resumed last week with the S&P 500 Index climbing 1.8%. Although expectations for the upcoming corporate earnings season are low, investors chose to focus on the positives. Specifically, investors reacted to dovish comments made by Federal Reserve Chair Janet Yellen in her speech at the Economics Club of New York, which counteracted some more hawkish comments made by Fed officials the previous week. Other asset classes came under pressure, including commodities and oil, causing some skepticism about the recent rebound. The oil sell-off was due to heightened doubts about the ability of major producers to formalize a production freeze agreement.
Commentary
Conditions Are Improving, but Investors Remain Skeptical
U.S. equities snapped their five-week winning streak and dropped slightly in a holiday-shortened trading week as the S&P 500 Index fell 0.7%. The news was dominated by the terrorist attacks in Brussels, but outside of a short-lived move to safe-haven assets, the horrific events appear to have had limited market impact. Instead, investors appeared to have taken a step back in response to some more hawkish comments from Federal Reserve officials and a sense that the strong rally since mid-February may have been overdone.
Commentary
Dovish Monetary Policy Signs Push Risk Assets Higher
The macro backdrop remained positive for risk assets last week. The Federal Reserve issued a surprisingly dovish statement, oil prices continued to climb and the crowded long-dollar trade unwound further. As a result, the S&P 500 Index climbed 1.4% and moved into positive territory for the year.
Commentary
Equities Advance Again, But Risks Lurk on the Horizon
Equities posted a fourth consecutive week of gains for the first time since
last November. The S&P 500 Index was up 1.2% due in part to yet another
increase in oil prices and a positive reaction to the European Central Bank’s
policy easing announcement.
Commentary
Equity Prices Advance Again as Negative Signals Diminish
The “risk-on” trend continued last week, helped mainly by stronger U.S.
economic data, heightened expectations for more European Central Bank
stimulus and additional stabilization in oil prices. High yield spreads fell and
equities rose, with the S&P 500 Index climbing 2.7%. Over the past three
weeks, U.S. stocks have nearly recovered all of the ground they lost earlier
in the year.
Commentary
2016 May Be a Frustrating Year for Both Bulls and Bears
U.S. equities climbed for a second straight week, with the S&P 500 Index rising 1.6%. Investors took solace in a renewed climb in oil prices and a sense that the United States was unlikely to enter a recession.
Commentary
Signs of Hope Emerge, but Pessimism Remains High
Equity prices soared higher last week around the globe. In the United States, the S&P 500 Index climbed 2.9%, and gains in Europe and Asia were even higher. However, U.S. stocks continue to lead the pack year to date. At least some of the gains can be attributed to an oversold bounce and overly negative sentiment. Relative stability in oil prices and in China, along with decent economic and earnings data, helped as well.
Commentary
A Recession Remains Unlikely Despite Market Turmoil
Equity prices fell again last week, with the S&P 500 Index dropping 2.6% despite a significant bounce on Friday. Investors continued to focus on downside risks and fears of slowing growth. Rising concerns over central banks adopting zero or negative interest rate policies also detracted from market sentiment, drove confidence lower and resulted in a sharp sell-off in banking sector stocks.
Commentary
Equities Remain Under Pressure as Investors Focus on the Negatives
U.S. equity prices fell again last week as investors followed the “de-risking”
theme that has dominated most of 2016. The S&P 500 Index dropped 3.0% for
the week. Oil prices staged a slight rebound last week, as expectations rose
for coordinated production cuts from OPEC countries and Russia.
The dollar experienced a sell-off last week as well, which provided some support for the
hard-hit commodity-related equity sectors.
Commentary
Equities Rally as Oil and Monetary Policy Remain in Focus
Volatility remained high last week as U.S. equities regained some ground, with the S&P 500 Index rising 1.8%. Stocks soared on Friday in response to the Bank of Japan’s decision to adopt a negative interest rate stance. Oil prices also rose over speculation that global production might fall. Corporate earnings were mixed, as results continued to be held back by the long-term decline in lower oil prices, a soft economic backdrop and the strong dollar.
Commentary
Markets Recover (for Now) as Investors Remain Wary
Equities remained volatile last week as the S&P 500 Index gained 1.4%
following two weeks of sharp declines. The rebound didn’t appear to be
driven by any fundamental shifts, although rising oil prices and expectations of
additional policy support from the European Central Bank and Bank of Japan
helped. In some ways, last week’s bounce may have been due to a reaction
from oversold conditions, and we are not seeing technical signs that would
suggest these gains will have sustained traction. Investors remain skeptical and
seem to be looking for the next crisis.
Commentary
The Sharp Equity Sell-Off Continues as Sentiment Sours
Equity markets remained in free fall last week, with the S&P 500 Index
dropping another 2.2%. Mixed economic data, a renewed collapse in oil
prices, financial turmoil in China and worries over credit conditions and
corporate earnings prompted fears that the U.S. economy may be heading for
recession. This put additional downward pressure on equity markets and other
risk assets.
Commentary
China Worries Trigger a Tough Start to the New Year
Equities dropped sharply last week with the S&P 500 index losing 5.9%, its worst first trading week of the year on record.1 Worries about slowing Chinese growth and policy uncertainty were the main culprits for the rout, and sagging oil prices triggered concerns about corporate earnings. Late in the week, markets saw a brief reprieve in light of a strong December jobs report.
Commentary
2015 Recap and a Look to the Year Ahead
Sir John Templeton coined the phrase, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” In 2015, we expected investors to transition from “skepticism” to “optimism” as we experienced (1) solid momentum in U.S. economic growth with low inflation, (2) a pickup in consumer spending based on job growth, confidence and a positive wealth effect, (3) solid earnings growth, (4) stimulus from low commodity prices and financing costs and (5) a still-good liquidity environment aided by stimulus from non-U.S. central banks.
Commentary
Weakness in Oil Puts Downward Pressure on Equity Prices
U.S. equities fell sharply last week, with the S&P 500 Index declining 3.7%.
This was its largest loss since August and the second-largest downturn of the year.
A sharp sell-off in oil prices was the main cause, along with credit and liquidity
concerns within the high yield market. The energy sector was the worst
performer last week and financials also took a hit.
In contrast, more defensive areas such as utilities, consumer staples and health care held up better.
Commentary
An Evolving Investment Landscape May Benefit Equities
Equity markets were volatile last week, losing ground early before rebounding.
Sentiment soured over a more modest easing announcement than expected
by the European Central Bank (ECB). OPEC’s decision to leave oil production
unchanged triggered a drop in energy prices, which also acted as a drag on
equities. Additionally, a weak manufacturing report contributed to the gloomy
tone. However, a strong jobs report on Friday seemed to pave the way for the
Fed to raise rates this month and allowed equity prices to rally strongly.
Commentary
Reasons to Stick with a Pro-Growth Investment Stance
U.S. markets were relatively quiet last week due to the Thanksgiving holiday.
Economic data were generally positive and investors seemed less concerned
about increasing evidence that the Federal Reserve will raise rates at its policy
meeting in December. The S&P 500 Index was up fractionally for the week.
Smaller capitalization stocks outperformed, as did the consumer staples and
energy sectors.
Outside of the United States, Chinese stocks sold off sharply
on Friday as investors grew nervous about policymakers’ latest attempts to
regulate the Chinese brokerage industry.
Commentary
The Back-and-Forth Continues as Equities Gain Ground
U.S. equities climbed sharply last week, with the S&P 500 Index advancing 3.3%, essentially erasing losses from the prior week.1 Somewhat surprisingly, investors did not focus on the terrorist attacks in Paris, paying more attention to the positives. The October Federal Reserve minutes seemed to strike the right balance between raising expectations for a December rate liftoff and maintaining a measured pace. Merger and acquisition headlines were also in the news and there were some bright spots on the corporate earnings calendar.
Commentary
Equities Decline, But Long-Term Trends Look Positive
U.S. equities came under pressure last week, with the S&P 500 Index falling
3.6%, its largest pullback since late August. A number of issues contributed to
the decline, including valuation concerns driven by the recent price rally and
struggling earnings. Some negative earnings results from department stores
and ongoing unease over Fed policy also contributed to souring sentiment.
For the week, utilities was the only sector to advance, while energy, technology
and consumer discretionary led the way lower.
Commentary
Global Growth Should Strengthen Next Year, Lifting Equities
Markets were mixed last week, but the S&P 500 Index was up 0.2%, posting its fifth consecutive weekly gain. Last week’s highlight was Wednesday’s Federal Reserve meeting. The central bank left rates unchanged, but indicated the possibility of an increase in December. Corporate earnings were also in the news, with several companies posting positive results. The health care sector made a notable turnaround to become the best performing last week while utilities lagged.
Commentary
Conditions Remain Uneven, but Equities Again Charge Higher
Equity markets climbed for the third consecutive week, with the S&P 500 Index gaining 2.1%.1 Much of the strength came from additional signs of easing from the European and Chinese central banks. Corporate earnings were mixed, with some health care and retail industries coming under pressure, while the technology sector provided impressive results. Overall, however, the majority of companies reported better-than-expected earnings results, which added to improved market sentiment.
Commentary
The Rally Continues, but Equities Appear Stuck in a Trading Range
Equity markets continued to advance last week, with the S&P 500 Index
climbing 0.9%. Third quarter earnings results were mixed, and investors
focused on stabilization in China and the upside of the Federal Reserve
holding rates steady. The utilities sector was the best-performing, while
industrials lagged.
Commentary
Signs of Healing in the Markets Are Slowly Starting to Appear
Signs of economic stabilization in China and improvements in commodity
markets helped U.S. equities recover some ground last week. Diminishing
concerns over the delay in Federal Reserve rate hikes also aided sentiment.
For the week, the S&P 500 Index jumped 3.3%, with the energy, materials and
industrials sectors leading the way. Health care, in contrast, struggled.
Commentary
Key Themes for the Fourth Quarter and 2016
Since the Great Recession, the global economy has grown sporadically at a
below-trend pace. This is unlikely to change in the short-term, but we expect
ongoing improvement, led by growth in the United States.
Commentary
Equities May Remain Trendless Until More Clarity Emerges
Sentiment was negative for most of last week, as investors focused on
continued uncertainty over Federal Reserve policy, slowing growth in China
and emerging markets and ongoing weakness in commodities. Stock prices
bounced on Friday following comments from Fed Chair Janet Yellen that a
rate increase was looking more likely in 2015. Nevertheless, equities finished
in negative territory, with the S&P 500 Index falling 1.4%. The health care, materials and industrials sectors came under pressure, while utilities, consumer
staples and financials finished higher.
Commentary
Equities Fall After the Fed Fails to Raise Rates
U.S. equities were little changed last week, with the S&P 500 declining 0.1%.
Stocks posted gains early in the week before falling on Thursday and Friday
after the Federal Reserve announced it would hold rates steady. For the week,
utilities, consumer staples and health care outperformed, while materials,
telecommunications and financials came under pressure.
Commentary
Market Unease May Continue for Some Time
Markets calmed last week relative to recent turmoil, but investor sentiment remains fragile. The focus on Federal Reserve policy, weakness in China and concerns about economic growth continued to drive sentiment. The S&P 500 Index gained 2.1%, commodities were flat and bond yields rose. Technology and health care posted the best results, while energy lagged.
Commentary
Markets Remain in Turmoil, but Should Stabilize Eventually
Global equity markets fell last week with the S&P 500 Index down 3.4% and
some non-U.S. markets declining even more. The sell-off is a continuing reflection of the ongoing turmoil that started a few weeks ago when China devalued its currency on August 11.
Commentary
Equities Endure Intense Volatility, but the Bull Market Survives
U.S. equities experienced extreme volatility last week. Prices plummeted
on Monday morning due to concerns over slowing growth in China as well
as uncertainty surrounding Federal Reserve policy. The sell-off was likely exacerbated by trading halts, liquidity pressures and systematic investing programs. Markets recovered later in the week as investors viewed conditions as oversold, and as oil and other commodity prices stabilized and advanced. For the week, the S&P 500 Index gained 1.0%. The energy, technology and consumer discretionary sectors led the way while utilities sold off sharply.
Commentary
The Correction May Not Be Over, but the Bull Market Should Persist
The S&P 500 Index fell 5.7% last week, its biggest weekly pullback since September 2011. Equities have been under pressure for some time, and it appears that investors finally gave in.
Commentary
China’s Currency Moves Spark Volatility and Uncertainty
U.S. equities endured high levels of volatility last week, dropping sharply in
the first few days of trading before recovering to end the week slightly higher.
The main focus was China’s surprising decision to devalue the yuan, which
raised concerns about a weaker global growth backdrop, deflationary trends,
the prospects of a currency war and what the move would mean for the U.S.
Federal Reserve and U.S. monetary policy.
Commentary
Sentiment Should Eventually Improve, Lifting Equities
Investors remained focused on Federal Reserve policy last week. Economic data continue to be mixed, but suggest that Fed action should occur sooner rather than later.
Commentary
Reasons to Stay with an Equity-Focused Investment Stance
A number of issues garnered attention last week, including falling oil prices, a sell-off in Chinese equities, ongoing corporate deal activity and mixed economic and earnings data.
Commentary
Equities Retreat, but Long-Term Prospects Should Improve
At the beginning of July, it became clear that Greece and European
policymakers would come to at least a temporary debt agreement. Since that
time, U.S. equity prices jumped, with the S&P 500 Index climbing more than
4% by the beginning of last week.
Commentary
Equities Rise as the Focus Returns to Fundamentals
U.S. equities experienced their largest one-week gain since late March last
week, with the S&P 500 Index rising 2.4%. Much of the gain came from an
easing of Greece’s debt problems and a calming of volatility in China’s equity
market. In both cases, policymakers achieved some breathing room, but
fundamental issues remain. Greece must still engage in some serious structural
reforms and the Chinese economy is still experiencing a significant slowdown.
Commentary
Risks from China Overtake Concerns About Greece
U.S. equity volatility spiked last week, driven by escalating concerns over
Greece’s debt problems and a sharp volatility in Chinese equities. The Chinese
stock market experienced a dramatic sell-off in recent weeks before staging
a comeback toward the end of last week. Early last week, the possibility
of additional Greek defaults and a potential messy exit from the eurozone
intensified. By the end of the week, however, Greek officials and policymakers
seemed to be approaching an agreement.
Commentary
A Mid-Year Assessment of Our Ten Predictions
We have described 2015 as the year when investors transition from disbelief to
belief, or from skepticism to optimism. Sir John Templeton coined the phrase,
“Bull markets are born on pessimism, grow on skepticism, mature on optimism
and die on euphoria.” We believe we are entering the “optimism” phase.
Commentary
Equities Gather Momentum on Positive Indicators
U.S. equities finished higher last week as the S&P 500 increased 0.8%, recording its highest weekly gain since April. The dovish message from Wednesday’s FOMC announcement boosted markets. Contagion from Greece appears relatively contained. The sell-off in equities in China did not impact global markets. The health care, consumer staples and utilities sectors rallied. Financials lagged as banking lost momentum and energy underperformed.
Commentary
Stay with Equities, but Prepare for Turbulence
U.S. equities were up fractionally last week, with the S&P 500 Index up 0.1%
as seven out of ten sectors traded higher. Strong retail sales figures kept
the focus on the Federal Reserve and the prospect of higher interest rates.
Concerns over Greece’s debt problems pushed volatility levels higher. The
banking industry performed well, while cyclical areas of the market such as
transportation lagged.
Commentary
As the Economy Grows, Bonds Struggle and Equities Tread Water
U.S. economic data last week seemed to confirm that the country is
rebounding from a weak first quarter. Manufacturing, construction, sales
figures and the labor market all showed signs of improvement.
Commentary
Economic and Earnings Growth Appear Poised to Move Higher
U.S. equities were fairly volatile last week as investors focused on potential
Federal Reserve action and concerns over Greece’s debt problems resurfaced.
Merger and acquisition activity also gathered headlines in the technology and
health care sectors.
Commentary
The Slowly-Growing Economy Should Persist for Some Time
There was little meaningful direction in equity markets last week. Global
bond yields generally rose and economic data was mixed.
Commentary
Equities Push Ahead Despite Softening Economic Growth
The continued advance in global bond yields dominated the financial story
again last week, although this trend eased slightly by the end of the week.
Economic data featured a relatively weak retail sales report.
Commentary
Roadblocks to Equity Gains May Start to Fade
Investors had a lot to react to last week, with the biggest story being a
continued rise in global bond yields. The Conservative Party secured an
unexpectedly decisive victory in the U.K. elections and Fed Chair Janet Yellen
commented about higher equity valuations.
Commentary
Equities Should Push Higher Along a Bumpy Road
Investors mostly focused on the positives last week. Corporate earnings
generally beat expectations and merger and acquisition activity remained
solid. Despite disappointing economic data, this trend reinforced the
perception that the Federal Reserve would hold off on rate hikes for the time
being. The turmoil in Greece rattled investors, but remains relatively contained.
Commentary
Drags on the Economy and Earnings Should Slowly Fade
Investors focused on the negatives last week, including some disappointing U.S. economic data and growing concerns over what will happen with Greece’s debt problems.
Commentary
Global Economic Risks Remain but Appear to Be Diminishing
Investors reacted to a range of data and news last week that included a further digesting of the relatively weak March jobs data, ongoing merger and acquisition news, signs of weakening corporate earnings and further evidence of upward pressure on wages. Amid all of the crosscurrents, U.S. equities finished higher, with the S&P 500 Index gaining 1.7%.1 Most international markets advanced as well, while Treasury yields and the U.S. dollar rose.1 Industrials, health care and energy stocks led the way while telecommunications, utilities and financials lagged.
Commentary
Improving Growth Should Eventually Push Equities Higher
On the heels of a somewhat rough first quarter, many investors are questioning the state of economic growth and wondering if equities still hold value. Our view is that an improving global economy should (eventually) allow for a renewed upturn in earnings prospects, and in equity markets. As such, we believe investors should remain patient.
Commentary
Further Equity Gains Await Earnings Recovery
Downward pressure on U.S. equities returned last week, with the S&P 500 Index falling 2.2%. This marked the second-largest weekly downturn of the year and the fourth negative week in the last five. Some of the decline can be attributed to fading positive sentiment that came in the wake of the recent Federal Reserve meeting. Ongoing negative earnings forecasts have taken their toll as well. All market sectors were in negative territory last week, with financials, technology and industrials losing the most ground and consumer staples and energy holding up the best.
Commentary
A Relatively Dovish Fed Statement Helps Equities Recover Ground
Last week featured some disappointing economic data and further downward revisions of corporate earnings estimates, but investors focused heavily on last week’s Federal Reserve policy meeting. The Fed’s statement was more dovish than expected, and investors interpreted the comments as an indication that rate increases would not happen as soon as some anticipated.
Commentary
Monetary Policy Concerns Continue to Weigh on Markets
Investors continued to focus on global monetary policy last week. The divergence between the start of the European Central Bank’s quantitative easing program and the pending shift in the Federal Reserve’s policy stance caused the euro to fall, the U.S. dollar to rally and acted as a drag on U.S. equities. Concerns over a weakening corporate earnings environment acted as an additional headwind for stock prices. the S&P 500 Index declined 0.8% for the week.
Commentary
Markets Pause While Awaiting Federal Reserve Activity
U.S. equities were mixed last week, with the S&P 500 declining -0.2%. The Federal Reserve (Fed) had a busy week, as the nuanced debate continues around when to begin policy normalization. The global policy divergence grabbed headlines, but the focus was mainly on negative yields in Europe and inflows to non-U.S. equities.
Commentary
Global Reflation Should Allow Equities to Push Higher
Financial markets reacted well to the provisional Greek bailout extension, but risks for Europe remain elevated. Wages appear to be starting to climb, which would increase pressure on the Fed to begin rate increases this summer. There is a valid bearish case to be made, but we think the positives for equities outweigh the negatives.
Commentary
Investor Sentiment Is Strengthening
U.S. equities finished higher for a second straight week, with the S&P 500 Index gaining 2.1% as it ended the week at a record high.1 Investors largely shrugged off disappointing retail sales figures and chose to focus on the positives.
Commentary
Why the Rest of 2015 May Not Look Like January
January was a rough month for equity markets. Volatility increased and stocks endured some notable setbacks. For the month, the S&P 500 Index fell 3.0% after declining 2.8% last week. We believe, however, that the same factors pushing stock prices lower will actually support longer-term economic growth. We expect markets will stabilize and recover in the coming months, and believe that by the end of 2015 equity prices will be at a higher level than where they began the year.
Commentary
Global Economic Growth Should Gradually Begin to Improve
Equity markets reacted to both positive and negative forces last week, but the positive factors won out in the end. Corporate earnings sentiment was lackluster and investors continued to focus on the negative effects of falling oil prices. However, markets experienced a significant tailwind from a more aggressive-than-expected quantitative easing announcement from the European Central Bank (ECB). For the week, the S&P 500 Index climbed 1.6%, snapping a three week losing streak.
Commentary
Despite Escalating Volatility, U.S. Fundamentals Remain Sound
U.S. equities declined for a third straight week, with the S&P 500 Index dropping 1.2%. Defensive areas such as utilities and telecommunications were the best-performing sectors, while the financial sector was hit the hardest. Notwithstanding last week?s decision by the Swiss National Bank to remove its currency peg, the fundamental backdrop has not changed much in recent weeks. We attribute the fall in equity prices to ongoing worries about the collapse in oil prices and the ripple effect on the global financial system.
Commentary
Markets May Be Choppy, but Equities Should Advance in 2015
The year started off with equity markets experiencing volatile trading. Stock prices dropped sharply in the first few trading days before recovering, while oil prices plummeted and bond yields fell. Last week, U.S. equities lost ground and the S&P 500 Index declined 0.6%.
Commentary
A Look Back at 2014 (and a 2015 Preview)
At the beginning of this year, we had three broad thoughts about what it would look like. First, we expected U.S. economic growth would accelerate moderately. Second, we believed Federal Reserve tapering would occur slowly and that global monetary policy would remain accommodative. And third, we forecasted that the U.S. equity market would grind higher due to central bank liquidity, modest economic acceleration, solid corporate earnings, contained inflation and an improving fiscal situation. These views formed the basis for the predictions we made in January. And at this point, we can offer a
Commentary
Falling Oil Prices Cause Jitters, but the Economy Stays on Track
The dominant financial story last week was the concern over the continued slide in oil prices, which have dropped close to 40% so far this year.1 Worries about the growing power of the Greek opposition party Syriza, and the potential effect on European policy should it assume control over the government, also contributed to investor unease.
Commentary
An Improving Economy Justifies a Pro-Growth Investment Stance
U.S. equities advanced again last week with the S&P 500 Index climbing 0.4%, extending its winning streak to seven weeks. Investors responded well to improving economic data and focused on the positive aspects of declining oil prices. In China, equities moved sharply higher and notched their best weekly performance in seven years as investors speculated that Chinese officials were on the verge on enacting additional policy support.
Commentary
Equities Benefit as U.S. Growth Solidifies
The dominant news story last week was President Obamas announcement of new executive actions on immigration policy, but investors chose to look past any political risks and focused on the positives. Specifically, markets reacted well to signs that the European Central Bank would expand its monetary easing and to a surprise interest rate cut in China.
Commentary
Economic Data Continues to Impress, Driving Equities Higher
Once again, a combination of solid economic data, decent earnings results and receding fears of global deflation pushed stock prices higher. The S&P 500 Index rose for a fourth consecutive week, gaining 0.4%. The telecommunications and technology sectors showed particular strength while utilities and energy lagged.
Commentary
Economy, Earnings and Policy Push Equities to New Heights
A combination of receding global growth fears, strong corporate earnings results and continued monetary policy support helped U.S. equities rise for a second week, with the S&P 500 Index climbing 2.7%.
Commentary
Equities Recover Some Ground and Still May Have Room to Run
With global deflation and growth fears fading, U.S. equities snapped their four-week losing streak last week with the S&P 500 Index gaining 4.1%. This advance marked the largest weekly gain since January 2013. Following the correction from the mid-September to mid-October, the S&P 500 has now rallied 8%, leaving it only 3% from its all-time high.
Commentary
Equity Losses Continue, but This Correction May Be Ending
Markets endured a sharp pullback and higher volatility, but technical factors suggest we may be nearing the end of the current correction. Long-term, we believe fundamentals remain sound, the U.S. economy should continue to grow and equities should be able to grind higher.
Commentary
Most Risk Assets Should Continue to Find Support
Equity prices continued to slide in the face of uncertainty over global growth and pending changes to monetary policy. U.S. growth is continuing to improve, and shows further signs of divergence from the rest of the world. Markets may remain sloppy for a while, but fundamentals suggest most risk assets should continue to perform well.
Commentary
Looking Past the Risks, Equities Still Appear Attractive
Last week featured some positive economic news, but equity markets sank nonetheless, with the S&P 500 Index falling 1.3%. On the bright side, we saw some strong data from the housing market and an upward revision to second-quarter gross domestic product growth (GDP).
Commentary
A Lack of Surprises Helps Equity Markets Make Gains
Equity markets rose again last week, with the S&P 500 Index climbing 1.3% and reaching another record high. Bond yields and the U.S. dollar drifted higher, while emerging market equities and commodities struggled. Two major events that resulted in a continuation of the status quo helped market sentiment.
Commentary
The U.S. Is Diverging From Other Developed Markets
U.S. equities fell amid a relatively quiet week, with the S&P 500 Index dropping 1.1%. The upcoming Federal Open Market Committee (FOMC) meeting drew quite a bit of attention amid increased speculation that the Federal Reserve may start signaling its long-awaited move to increase rates.
Commentary
A Choppy Path Stretches Ahead, but It Could Favor Equities
U.S. equities continued their winning ways, with the S&P 500 Index advancing 0.2% last week. Although the August employment data were somewhat disappointing, investors were cheered by strong manufacturing trends. Events outside of the U.S. also contributed to the positive tone.
Commentary
Stronger Growth Should Push Equities Higher
A rash of positive news propelled stock prices higher for the fourth consecutive week, marking the longest winning streak for equities since last November. The S&P 500 Index pushed above the 2,000 level for the first time as it gained 0.8% for the week.
Commentary
Equities Climb as Investors Focus on Fundamentals
Equities have recovered all of the losses experienced in July through early August. The Fed appears to be slowly paving the way for interest rate increases, but were not expecting any immediate changes. The global economy is growing, but remains weak. In this environment, we believe investors should be more selective.
Commentary
Tug of War Continues Between Fundamentals and Geopolitics
Important progress in the global recovery, U.S. labor market and corporate earnings has been masked by geopolitical tensions. The conflict involving Russia could have a significant impact on the eurozone and global growth. Market volatility is likely to increase in the short term, causing headwinds for risk assets.
Commentary
Mounting Pressure Weighs on Equities
U.S. equities experienced a sharp pullback last week, with the S&P 500 Index falling 2.7%, its largest weekly decline in over two years. A number of factors contributed to the downturn, including rising geopolitical tensions, concerns over Federal Reserve policy, Argentinas debt default, a slowdown in the housing recovery and a sense that the market rally has been getting tired. Not all of the news was negative, however, since we also saw some strong economic and earnings data and increasing merger and acquisition activity.
Commentary
Economic Signals Are Improving, Which Should Help Equity Prices
U.S. equities lost ground last week, with the S&P 500 Index dropping just under 1%, its largest weekly loss since early April.1 Cyclical sectors lagged, while defensive areas (chiefly utilities and telecommunications) led the way. A number of factors could be blamed for the decline, including signs of slowing European growth and lingering debt problems, as well as some downward revisions in corporate earnings guidance. In our view, however, the most reasonable explanation for the pullback may simply be fatigue and consolidation following the multi-week price advance.
Commentary
Is The Fed Underestimating Inflation?
Following a week in which investors took pause and focused on the negatives, they reversed course last week and pushed equity prices higher. A number of factors seemed to contribute to the positive tone, not the least of which was an indication from the Federal Reserve (Fed) that there will be no near term change to its accommodative monetary policy.
Commentary
Crosscurrents and Fatigue Cause a Slight Slump in Stocks
Favorable monetary policy and improving economic growth have remained steady, but investors appeared to focus on some of the negatives last week. Sentiment seemed to sour due to the rising turmoil in Iraq (and subsequent rise in oil prices), as well as House Majority Leader Eric Cantors primary defeat, which served to highlight a more partisan environment before the November elections. For the week, the S&P 500 Index declined 0.6%.
Commentary
Bright Signs for the Economy and Equity Markets
The macro backdrop last week was positive for the markets. As expected, the ECB cut interest rates, highlighting the favorable global monetary policy backdrop. Closer to home, solid vehicle sales and a good May labor market report gave investors additional reasons to bid up stock prices. The S&P 500 Index advanced 1.4%, marking a third straight week of gains above 1% the longest such streak since last September. Looking ahead, we believe the combination of an improving world economy, low levels of volatility and easy global monetary policy should continue to provide support for equ
Commentary
Equities and Bonds Diverge Amid Low Volatility
Another week brought another record close for equities. The S&P 500 Index increased 1.2% for the week, notching a new high, but investor attention appeared to be focused elsewhere. Low levels of market volatility, a pickup in M&A activity, a difficult revenue environment for banks and improving housing data all gathered headlines, yet the bond market garnered the most focus.
Commentary
Economy Begins to Accelerate While Equities Push Higher
U.S. equities finished higher last week as the S&P 500 advanced 1.3%, snapping a two-week losing streak and ending at a new record high. Markets seemed to lack conviction, but the path of least resistance appeared skewed to the upside as momentum for the economic recovery was positive.
Commentary
Equity Markets Remain Mixed as Fundamentals Slowly Improve
U.S. equities finished mixed last week as the Dow Jones Industrial Average was the only major index to end in positive territory. The overall macro narrative appears favorable despite the lack of market direction. Scrutiny of beaten-down momentum stocks resurfaced, although broader market spillover remained muted.
Commentary
The U.S. Economy Reached a Turning Point in April
U.S. equities finished higher last week with the S&P 500 advancing nearly 1.0%. Positive sentiment has been supported by growing traction for the economic recovery, key economic data and corporate commentary. Although the upbeat dynamics were mentioned in the latest FOMC statement, policy normalization expectations have not changed. Another widely discussed tailwind was M&A headlines. Although tensions continue in Ukraine, geopolitical risks were mostly on the back burner.
Commentary
Equities Awaiting Stronger Growth Before Next Move
U.S. equities finished modestly lower last week with the S&P 500 nearly unchanged. Most of the damage occurred on Friday when escalating tensions surrounding Ukraine weighed on sentiment. Positive dynamics included an improvement in first quarter earnings metrics, a notable pickup in M&A activity and deal speculation. A broader macro narrative reflects better traction for the recovery and gradual policy normalization. With momentum plays under renewed scrutiny, several internet, software and biotech companies sold off despite an expected cushion from solid first quarter results.
Commentary
Equities Sag as Macro Backdrop Quiets Down
Last week U.S. equities struggled for direction as the S&P 500 declined 0.4%. Small cap stocks were hit harder, and macro and geopolitical issues seemed to be on the back burner. Overall, emerging markets rallied, value and contrarian plays outperformed and Japanese stocks bounced.
Commentary
Stocks Rise as Economic Backdrop Slowly Improves
U.S. equities finished higher last week, with the S&P 500 increasing 1.4%. Ukraine seemed to be receding in investors? minds. Despite the volatility and sharp increase in bond yields on Wednesday, the hawkish takeaways from the FOMC meeting were not a lingering overhang.
Commentary
Stocks Weighed Down by Ukraine, China and U.S. Economy
U.S. equities came under pressure last week as the S&P 500 declined almost 2.0%. Blame was primarily placed on the crisis in Ukraine and the growth slowdown and tight credit environment in China. Safe haven investments such as U.S. Treasuries and gold outperformed. Stocks may have already discounted the weather distortions on early 2014 data, and an overhang is expected to linger into first quarter earnings season. Cautiousness surfaced for investments that support the recovery, including banks and homebuilders.
Commentary
Positive Payroll Report Offsets Geopolitical Concerns
U.S. equities increased 1.1% last week after somewhat volatile trading due to heightened tension in Ukraine. Although the crisis dominated headlines, the market relegated the major geopolitical issue to the back burner. The broader macro narrative did not change, as concerns about dampened growth momentum continued to be pacified by the distortion from adverse weather.
Commentary
Equities Rise Despite Mixed Fundamental News
U.S. equities increased 1.3% last week as the S&P surpassed the key 1850 level and pushed to new record highs. One favorable dynamic of the rally was the upside leadership from retail stocks, as earnings were largely ahead of expectations. Fed Chair Janet Yellen suggested concern about softerthan-expected spending in a number of recent data releases, but the bar for adjusting the tapering process has not been lowered.
Commentary
Confusing Crosscurrents Result in Trendless Market
U.S. equities finished mixed after the shortened holiday week.1 The broad market narrative did not change, as additional disappointing economic data was largely attributed to the impact of adverse weather. Comfort that the recovery may be gaining traction was evidenced through Fed discussions and the January FOMC minutes, with consensus expectations for tapering to continue at a measured pace. Some renewed concerns about a growth slowdown in China surfaced but had little impact.
Commentary
Global Growth Expectations Push Stocks Forward Despite Weather
U.S. equities finished sharply higher last week with the S&P 500 increasing 2.3% and all major U.S. averages up more than 2%.1 The rapid market recovery from the January pullback is a bigger surprise than the pullback that preceded it.
Commentary
Growth and Policy Uncertainty Cause Choppy Markets
U.S. equities closed with modest gains last week, as the S&P 500 overcame Monday?s decline, the largest one-day percentage loss since June 2013. The weaker-than-expected ISM manufacturing and vehicle sales data drive the sell-off on Monday, exacerbating the focus on slowing momentum for the U.S. recovery. The impact of adverse weather complicates the picture. Also, although January non-farm payroll missed expectations, there were more upbeat indications for the household survey.
Commentary
Emerging Market Turmoil Creates January Decline
U.S. equities finished lower last week, as the S&P 500 ended January with the first monthly loss since August 2013 and the largest monthly decline since May 2012. A global retreat from risk has been sparked by unrest around the world, sell-offs in emerging markets led by a 20% decline in the Argentine peso, weaker than expected economic reports from China, U.S. economic growth concerns in light of frigid temperatures and anxiety over Fed tapering.
Commentary
Emerging Market Issues Weigh on U.S. Equities
U.S. equities finished lower last week as the S&P 500 declined 2.6% and suffered the largest weekly pullback since June of 2012. U.S. stocks are down approximately 3.0% both year to date and from all-time highs. In 2014, lack of direction in the market has been a focus, and the waning influence of macroeconomic news caused a notable shift late last week.
Commentary
Crosscurrents Buffet Markets
U.S. equity performance was mixed last week, as the S&P 500 recovered from Mondays sell-off that was the largest one-day decline since early November. Economic data was mostly in line or slightly better than expected, following the disappointing December unemployment report. Corporate earnings drove much of the price action. Bank earnings were fairly well received but did not always translate to good performance since the stocks ran up earlier. Negative guidance trends remain an overhang, particularly for retail.
Commentary
Stocks Rise Modestly in First Full Week of Trading
U.S. equities finished mostly higher for the first full week of the year, with the S&P 500 gaining approximately 0.6%. There were no meaningful directional drivers behind the price action, which is a dynamic that has been prevalent so far in 2014.
Commentary
A Strong Finish for 2013
For our weekly subscribers, we wanted to take an opportunity to look back on the year. We began 2013 with an outlook for the prospect of improvement for the global economy and risk assets. We thought global policymakers unprecedented attempts to reflate global growth would show some signs of bearing fruit, especially in the United States and China. In our forecast, equity markets would continue to be choppy in light of the fiscal cliff issues, but an inevitable political compromise would reduce the economic drag.
Commentary
2014 Investment Outlook: Economic Growth Should Broaden
For the first time in several years, we approach the new year without big clouds on the horizon. In the United States, accommodative monetary policy has healed many of the wounds from the 2008-2009 crisis.
Commentary
Improving Economic Data Imply Further Global Recovery
U.S. equities finished last week in barely negative territory, ending the positive streak for the market. Economic data concerning the post-government shutdown climate has improved. Employment data beat estimates and increased by 203,000 jobs in November, and the unemployment rate fell to 7.0%, also surpassing expectations.
Commentary
Looking Out on the Horizon for Equities
U.S. equities finished higher for an eighth consecutive week as the S&P 500 increased 0.1%, representing the longest positive streak since 2004. Inertia may have carried markets forward in a relatively quiet trading week without major headlines. Retail news appeared fairly positive in anticipation of a strong start to the Thanksgiving shopping weekend. Economic data was mixed.
Commentary
Equities Extend Gains for the Seventh Consecutive Week
U.S. equities finished higher again last week as the S&P 500 increased 0.4%. The Fed continued to dominate headlines, with heightened emphasis on the distinction between tapering and tightening. Bubble speculation continued to receive attention in the press, while many articles refuted such concerns. The financial sector performed well, led by banks.
Commentary
The Muddle-Through Economy and Grind-Higher Equity Market Continue
U.S. equities finished higher last week as the S&P 500 and Dow Jones Industrial Average closed at record highs, marking the sixth straight week of advances.1 Several macroeconomic themes are important as third quarter earnings season comes to an end. Fed Chairman nominee Janet Yellen spoke before the Senate in support of current monetary policy and suggested a similar path under her leadership. Economic data was mixed for the week, and any economic weakness continues to be perceived as supporting a delay in tapering. In turn, this can be seen as positive for equities.
Commentary
Markets Vacillate Between Stronger Economy and Fed Accommodation
U.S. equities finished mostly higher last week as the S&P 500 increased 0.6%, ending higher for the fifth straight week. The return of central bank action was a primary concern. The European Central Bank (ECB) surprised investors with a 0.25% rate cut, while the debate over the Federal Reserves impending tapering decision continued in earnest.
Commentary
Skepticism Still Abounds
U.S. equities were mixed last week as the markets were broadly unchanged. The October FOMC statement was a bit more hawkish than expected, causing concern that the recent delay in tapering may have been too aggressive. Other worries appear to be tail risks surrounding a possible Fed liquidity trap and accompanying asset bubbles. Economic data were mixed as markets struggle with the trade-offs between recovery and policy normalization.
Commentary
Equities Reach All-Time HighsYet Again!
U.S. equities marked another all-time high last week as the S&P 500 increased 0.9%. (1) Global equities reached new cycle highs for the second week in a row. Many investors have concerns that the gains will not last since the world economy remains lackluster and the liquidity driving the current rally will eventually stop.
Commentary
Fourth Quarter Investment Outlook
The macro theme of the fourth quarter and early 2014 is monetary reflation and global growth resynchronization. The Feds surprising decision to postpone tapering its QE program will likely encourage further risk-taking. In the meantime, we observe increasing signs of a synchronized improvement among the four important economies - the United States, Europe, Japan and China.
Commentary
Can Markets Remain Resilient in Light of Political Dysfunction?
Equities were mixed again last week, and the markets remain focused on the budget impasse in Washington, D.C., after the second week of the partial government shutdown. The S&P 500 closed the week in positive territory, increasing 0.8%.1 It is hard to ignore headlines and market volatility, but the real issues for markets are the debt ceiling debate and third quarter corporate earnings announcements.
Commentary
Government Shutdown Masks Pending Debt Ceiling and Third Quarter Earnings
Equities were mixed last week as the markets were focused on the budget impasse in Washington, D.C., that forced the federal government into a partial shutdown. As with the 17 prior shutdowns, we do not anticipate a lasting impact on the economy or markets. While the shutdown makes headlines, the issues that will likely have the most impact are the debt ceiling debate and third quarter corporate earnings announcements, which could mean a bumpy ride for investors.
Commentary
Congress Holds Equities Hostage
U.S. equity advances ended last week and the S&P 500 declined -1.0%.1 Markets appeared concerned about overbought conditions from a strong run up over the past three weeks and uneasy about Federal Reserve (Fed) monetary policy normalization as well as the credibility of its communication strategy. Other widespread reasons for the downturn included increased focus on the fiscal battles in Washington, D.C., heightened worries about a possible near-term government shutdown and the contentious debt ceiling debate.
Commentary
Fed Inaction Lengthens Reflationary Economy
U.S. equities advanced last week as the S&P 500 increased 1.32%.1 The Federal Reserve (Fed) delivered a big surprise by leaving intact the current $85 billion monthly purchase program. The Committee appears nervous about the resiliency of the economy. Chairman Bernanke pointed to three factors for postponing tapering: 1) the need for more labor market data to be confident in the outlook, 2) a desire to assess the degree to which tighter financial conditions, particularly mortgage rates, are affecting the real economy and 3) an interest in gaining clarity on upcoming fiscal debates.̶
Commentary
“Risk-On” Resumes as Uncertainty Subsides
Equity markets rallied last week with the hope of a diplomatic solution to the crisis between Syria and the United States. The S&P 500 advanced 2.03% for the week.1 Broadly, the S&P 500 is in a churning phase after witnessing an all-time high of 1709 on August 2 and then stalling.1 We believe the market has been on hold while waiting for lower oil prices, progress on Syria, further global growth and successful Federal Reserve tapering.
Commentary
Equities Advance Despite Concerns Over Weak Employment and Growth
U.S. equities moved higher last week, with the S&P 500 advancing 1.40%.1 In the face of another disappointing employment report, positive recovery expectations provided tailwinds. Key manufacturing and service sector data surprised to the upside, and improved corporate confidence was highlighted by merger and acquisition activity. Developments outside the U.S. supported recovery and reform, and emerging market fears lessened. A potential U.S. military strike on Syria was an overhang as President Obamas decision to seek congressional approval raised concerns about other looming battles.
Commentary
As Uncertainty Abounds in September, Sideways Consolidation Continues
Global equities struggled last week, with the S&P 500 declining -1.39%.1 Volatility rose from geopolitical uncertainty over the military strike in Syria.2 Oil prices spiked with concerns about escalation and tension but retreated due to dampened international support and expectations that a military campaign would be short-lived. The U.S. Treasury announced its borrowing capacity will be exhausted by mid-October, exposing contentious fiscal battles. Reports mentioned former Treasury Secretary Larry Summers may be leading the succession race for Fed Chairman.
Commentary
Equities Relatively Flat as Crosscurrents Remain
U.S. equities finished mostly higher last week, and the S&P 500 advanced 0.50%.1 The Dow Jones Industrial Average was the only the only major U.S. index to falter last week.1 Market sentiment was dominated by the notion that the market had become too bearish in the wake of the prior weeks sell-off in equities and credit. Continued improvement in global recovery sentiment seemed to provide a notable tailwind. The Fed dominated headlines markets appear obsessed with policy normalization and succession issues.
Commentary
Equity Fatigue Continues with Headwinds from Bond Sell-off
U.S. equities finished lower for the second straight week as the S&P 500 declined 2.04%, narrowly escaping its worst week of the year. A specific catalyst behind the pullback was not identified by us or market analysts.
Commentary
The Key Economic and Market Forces Guiding Equity Markets
This week we want to address important themes that underline our continued cautious optimism for a slowly improving global economy and signs of revenue and earnings growth momentum.
Commentary
Equities Grind Higher as the Economy Continues to Muddle Through
U.S. equities advanced last week, with the S&P 500 increasing 1.10%.1 For the month of July, the S&P gained 5.09%, and equities have increased 21.33% year to date. Second quarter earnings season is nearly complete, and there has not been a material change in estimated earnings for the balance of the year or 2014. Revenues were slightly ahead of expectations, and earnings per share were approximately 3% higher than expected, annualizing at about $110 per S&P 500 share.
Commentary
Conflicting Crosscurrents Move Equities Sideways
U.S. equities finished last week narrowly mixed, with the S&P 500 falling -0.02%.1 While the second quarter earnings per share growth continues to move higher, revenue growth remains below trend. The economic calendar is focused on this weeks release of the July employment report. Global macro headlines generated more uncertainty than direction for the markets.
Commentary
Earnings Acceleration Likely Needed for Next Upturn in Stocks
U.S. equities finished mostly higher last week. For a fourth straight week, the S&P 500 and Dow Jones Industrials were up (returning 0.73% and 0.57% respectively for the week), while the NASDAQ underperformed at -0.34%. It was a busy start for second quarter earnings. More than 70% of the 100 S&P 500 companies that have reported earnings have beaten consensus earnings per share expectations by approximately 3% in aggregate.
Commentary
Mid-Year Outlook: Waiting to Move Beyond a Muddle-Through Economy
By focusing on current economic conditions while giving due importance to the uncertainty created by Fed actions we offer thoughts for consideration in evaluating risk-on investments.
Commentary
A Mid-Year Ten Predictions Assessment
As we reach the halfway point in the year, we want to track our progress against the predictions made in January. Equities had a strong six-month period, although a correction occurred in May and June, primarily due to a very difficult bond market. Perhaps the great rotation started late in the second quarter as investors moved from bonds and bond-like equities, with measured progress for cyclical and growth equities. Anxiety remains over the Fed ending its quantitative easing experiment, and there are also financial issues in China that are cause for concern.
Commentary
The Fed Unintentionally Lays an Egg
U.S. equities declined last week as the S&P 500 ended down 2.09%.1 The S&P suffered the first back-to-back one-day declines of more than 1% since last November. Global equities and bonds were also hit hard, with large sell-offs in emerging market assets, commodities and commodity currencies. Concerns about the fallout from dampened Fed policy accommodation are driving the weakness.
Commentary
Sloppy Markets Continue
Last week the S&P 500 declined 0.97%,1 while many global equity averages fell for the fourth week in a row. Early in the week, discussion of tapering by the Federal Reserve was a big headwind, as discomfort over a slower pace of policy accommodation rippled through global markets. Thursdays rally was driven by thoughts that tapering fears may be overdone. Markets were also helped by better employment and consumption data.
Commentary
Equities Hit Pause
Stocks and other risk assets struggled last week, with the S&P 500 declining 1.11%.1 Equities finished lower on Friday, the final trading session of May. The decline trimmed Mays gains and sealed the second consecutive weekly decline for U.S. equities. The S&P increased 2.34% for the month and has gained 4.31% this quarter and 15.37% for the year.1
Commentary
Taking Stock
U.S. and global equities were under pressure last week, with all major U.S. indices lower for only the fourth time this year. With discussion of the Fed tapering its stimulus, market uncertainty gained momentum. The S&P 500 was down 1.0% for the week.1 We consider the market pullback technical in nature since the mention of a Fed quantitative easing exit likely created a natural point to take profits after the recent rally.
Commentary
(Yawn)...As Equities Advance Another 2%
U.S. equities advanced again last week, with the S&P 500 increasing 2.1%. Global stocks are reaching new highs in this cycle and the U.S. market is at an all-time high. Bonds were hurt in the move, dragging credit down, while commodities fell slightly on weaker manufacturing data. The unrelenting equity rally and an environment without positive news about earnings and the economy is making many investors uncomfortable.
Commentary
Cyclical and Emerging Market Strength May Be Pointing to Better Growth
Last week U.S. equities advanced as the S&P 500 increased by 1.3%. We have been amazed bythe markets ability to continue to rally in an environment in which sales growth has been anemic and earnings gains have been largely based on companies abilities to manage margins and utilize financial engineering.
Commentary
Are Investors Breathing a Sigh of Relief?
Last week U.S. equities delivered another gain as the S&P 500 increased by 2.0%.1 On Friday, the U.S. jobs report offered relief from fears of an accelerating weakness caused by prior softness during this time in each of the last three years. However, the full set of economic data for the week supports our view of a slower second quarter in a post-sequestration environment.
Commentary
Economic Slowdown Has Not Weakened Share Prices
U.S. equities rebounded last week as the S&P 500 increased by nearly 1.8%,1 despite continued weak economic data. We believe recent data is not yet weak enough to change forecasts. The relative stability of data and forecasts - supported by stimulative monetary policies, an improving U.S. housing market and fading political polarization in the U.S. and Europe - sends a message of reasonably low volatility and manageable downside risks.
Commentary
Commodity Declines and Weak Data Startle Investors
U.S. equities declined last week as the S&P 500 fell by more than 2.0%, which came on the heels of a new all-time high the prior week. Led by gold, commodities experienced volatility and declined over the past two weeks. Other detractors included disappointing first quarter Chinese economic numbers and somewhat softer U.S. releases.
Commentary
The (Up) Beat Goes On, Part II
We wrote Part I of this theme on February 11 during the first quarter rally, when the S&P 500 closed the week at 1518. This past week the S&P ended at 1589, after increasing 2.3%. Global stock prices continue to push to new highs and thus provide support for a pro-equity bias. One nuance is that the composition of the equity rally has been abnormally defensive.
Commentary
Economic Slowdown Halts Equity Rally
The latest softness in economic indicators probably means that more consolidation in the equity markets is required before we can advance beyond the recent all-time highs. During March, nearly all of the activity for the S&P 500 was within 1% of 1550. Equities may move lower due to deteriorating technical conditions and the possibility of weak first quarter earnings reports.
Commentary
First Quarter Recap
This past month marked the fourth anniversary of the global equity market bottom on March 9, 2009. U.S. stocks have clawed back all of the losses from the Great Recession and are near historical highs. Most other major markets are still well below their 2007 peaks, but have rebounded sharply since last June and look increasingly resilient. However, there is tremendous anxiety about the economic outlook, and many investors fear equities and other risk assets are floating on a sea of liquidity rather than solid fundamentals. We are more constructive and maintain a pro-growth investment stance.
Commentary
Cyprus Reminds Us of Threats and Improving Global Economy
Equity averages sagged slightly last week. Strength later in the week made up for earlier weakness as the equity rally paused for the Cyprus crisis. We (and the consensus) perceive Cyprus as mainly a local problem and believe it supports our view to remain cautious with Eurozone weightings.
Commentary
A Tired Equity Market Crawls Higher
U.S. equities rose again last week as the S&P 500 increased 0.66%, with an overall gain for the year of 9.96%.1 The remarkable resilience of the U.S. economy against fiscal cliff headwinds has boosted equity investor sentiment. The U.S. macroeconomic outperformance has also helped U.S. equities outperform global counterparts. Investor preference toward the U.S. has largely been confirmed by rising flows into U.S. equities.
