Weekly Market Update, February 22, 2016

Posted on February 23, 2016 by Neal Gallagher

Presented by Mark Gallagher

General market news
• The 10-year Treasury traded in a tight range last week, with a low of 1.72 percent and a high of 1.84 percent, opening with a yield of 1.77 percent this Monday morning. The 30-year began the week with a yield of 2.63 percent after trading in the range of 2.59 percent to 2.70 percent last week.
• Equity prices shot higher in early trading last week, with domestic and international indices averaging gains of more than 3 percent. International indices managed to outperform domestic indices for the most part thanks to a weakening dollar. Growth-oriented stocks continued to outpace value stocks.
• Oil prices kept up their march higher last week, with Brent crude touching $35 per barrel for the first time since early January. Rig counts have been cut dramatically over the last year, but supply and inventories still remain high.

Equity Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	2.90%	−0.95%	−5.86%	−6.60%
Nasdaq Composite	3.91%	−2.21%	−9.86%	−7.45%
DJIA	2.75%	−0.09%	−5.47%	−6.48%
MSCI EAFE	5.25%	−1.23%	−8.36%	−13.10%
MSCI Emerging Markets	4.97%	0.59%	−5.94%	−22.16%
Russell 2000	3.93%	−2.36%	−10.95%	−16.58%

Source: Bloomberg

Fixed Income Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	0.55%	1.93%	2.00%
U.S. Treasury	0.93%	3.08%	3.61%
U.S. Mortgages	0.32%	1.63%	2.90%
Municipal Bond	0.39%	1.58%	4.33%

Source: Morningstar Direct

What to look forward to
We will see more housing data this week, with releases of both Existing and New Home Sales.

Durable Goods Orders are expected to have ticked up in January, while the preliminary estimate of Fourth-Quarter Gross Domestic Product is expected to drop to 0.5 percent.

The week will end with data on Personal Income and Outlays, with both income and spending expected to improve, as well as Consumer Confidence.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Barclays Capital Mortgage-Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Barclays Capital Municipal Bond Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. The Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index measures the performance of intermediate (1- to 10-year) U.S. TIPS.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.
Authored by the Investment Research team at Commonwealth Financial Network.

Weekly Market Update, February 16, 2016

Posted on February 16, 2016 by Neal Gallagher

Presented by Mark Gallagher

General market news
• The yield on the 10-year Treasury dropped to 1.53 percent late last week, the lowest level since the summer of 2012, but opened at 1.75 percent early Tuesday morning. The 30-year Treasury yield was as low as 2.46 percent last week before opening at 2.60 percent Tuesday morning.
• Equities sold off last week, and performance would have been much worse if not for a rally on Friday. Domestic markets fared better than international markets, which were closed in the midst of the U.S. rally. International markets rebounded strongly on Monday, however, while U.S. markets were closed for the Presidents’ Day holiday.
• Oil prices bounced back last week. Over the weekend, news of a possible agreement to freeze production by major exporters, including Russia and Saudi Arabia, offered potential for further price inflation, but the plan could unravel without support from other OPEC nations.

Equity Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	−0.72%	−3.74%	−8.51%	−8.80%
Nasdaq Composite	−0.56%	−5.89%	−13.25%	−9.59%
DJIA	−1.23%	−2.75%	−7.99%	−8.90%
MSCI EAFE	−4.71%	−6.15%	−12.92%	−15.51%
MSCI Emerging Markets	−3.83%	−4.17%	−10.39%	−24.77%
Russell 2000	−1.34%	−6.06%	−14.32%	−18.96%

Source: Bloomberg

Fixed Income Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	0.40%	1.78%	1.50%
U.S. Treasury	0.98%	3.13%	3.17%
U.S. Mortgages	0.16%	1.46%	2.43%
Municipal Bond	0.60%	1.80%	4.47%

Source: Morningstar Direct

What to look forward to
During this holiday-shortened week, we will receive important data on both the housing market and inflation.

On Wednesday, economists are expecting to see an uptick in Housing Starts and an increase in Building Permits.

On the inflation front, both headline and core numbers for the Producer Price Index will be reported on Wednesday, and a slight pickup is expected.

Friday will bring headline and core readings for the Consumer Price Index, where an uptick is also expected.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.

Authored by the Investment Research team at Commonwealth Financial Network.

Weekly Market Update, February 8, 2016

Posted on February 9, 2016 by Neal Gallagher

Presented by Mark Gallagher

General market news
• The strong move Treasuries experienced in January continued in the first week of February. The 10-year Treasury opened with a yield of 1.85 percent early Monday morning and promptly moved lower to 1.79 percent. The 30-year opened at 2.68 percent and dropped to 2.63 percent, while the 2-year opened at 0.73 percent and moved to 0.67 percent.
• Equity markets lacked direction and leadership last week, with the S&P 500 Index dropping more than 3 percent. The weakness started on Tuesday with nearly a 2-percent loss and carried into Wednesday, before a strong rally allowed for a minor gain for the day. But negative sentiment prevailed yet again, bringing another large sell-off on Friday.
• Earnings results have been mixed, driving increased stock volatility. In addition, economic reports have been coming in somewhat weaker than anticipated, highlighted by Friday’s relatively poor jobs report.

Equity Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	−3.04%	−3.04%	−7.85%	−6.90%
Nasdaq Composite	−5.36%	−5.36%	−12.76%	−7.29%
DJIA	−1.54%	−1.54%	−6.85%	−7.10%
MSCI EAFE	−0.41%	−0.41%	−7.60%	−10.19%
MSCI Emerging Markets	−0.36%	−0.36%	−6.83%	−22.65%
Russell 2000	−4.78%	−4.78%	−13.16%	−17.32%

Source: Bloomberg

Fixed Income Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	0.24%	1.62%	1.10%
U.S. Treasury	0.48%	2.62%	2.29%
U.S. Mortgages	0.03%	1.33%	2.31%
Municipal Bond	0.32%	1.52%	3.74%

Source: Morningstar Direct

What to look forward to
This week will be light in important economic news, with much of the closely followed data released on Friday.

Retail Sales are expected to have increased in January.

We will also see the preliminary reading of University of Michigan Consumer Sentiment for February.

For IARs: Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.
Authored by the Investment Research team at Commonwealth Financial Network.

Market Update for the Month Ending January 31, 2016

Posted on February 9, 2016 by Neal Gallagher

Presented by Mark Gallagher

Markets drop around the world
January was a terrible month for markets around the world. U.S. markets had their worst January since 2009, with all three major indices posting declines. The Dow Jones Industrial Average was down 5.39 percent, the S&P 500 Index declined 4.96 percent, and the Nasdaq dropped 7.82 percent. All three indices are now well below their 200-day moving averages.

A loss of confidence was the primary reason for the downturn. Market turbulence in China rattled investors, as the Federal Reserve’s (Fed’s) rate increase started to remove their security blanket. Fundamentals also weighed in. A further substantial drop in oil prices eroded that industry’s revenue and profit prospects. Moreover, corporate earnings for fourth-quarter 2015 were expected to decline 5.8 percent. Declining earnings made it difficult to justify the relatively high stock valuations that had prevailed at the start of 2016.

International markets had a worse January than U.S. markets. The MSCI EAFE Index of developed markets dropped 7.23 percent, and the MSCI Emerging Markets Index declined 6.48 percent. Technically, both indices are well below their 200-day moving averages.

Fixed income did well. The Barclays Capital Aggregate Bond Index gained 1.38 percent for the month.

U.S. economy grows, though more slowly
U.S. gross domestic product (GDP) growth for fourth-quarter 2015, reported in January, was 0.7 percent, down from the previous quarter’s 2 percent. The decline was due largely to weakness in U.S. manufacturing and exports, held in check by the strong dollar.

Consumer spending growth also declined in the fourth quarter, though consumer confidence remained strong and savings rates increased. These trends continued into January.

Positive economic signs included a strong jobs picture and rising wage growth. The housing market also grew strongly, with December new home sales surprising to the upside. This factor appears to offer the prospect of further growth, as new home sales remain below historical levels and therefore could have room to improve (see Figure 1).

International problems multiply
Much of the slowdown in U.S. GDP appears to have stemmed from problems in the rest of the world. Substantial declines in China’s stock markets forced concerns about that nation’s financial system and slowing economy to the forefront of world attention. Although the People’s Bank of China continues to drive stimulus, there are signs that the bank’s ability to affect the economy is waning.

Europe also continues to struggle. The European Central Bank is still pursuing stimulus policies, but eurozone political concerns may negatively affect growth.

Finally, at month-end, Japan announced negative interest rates. This is widely considered a radical move and one that Japan’s central bank took only because all other measures had not succeeded.

The Fed starts to raise interest rates
Despite global economic problems, the Fed felt confident enough in the U.S. economy to raise interest rates. But this move exacerbated other concerns, notably about the future strength of the dollar.

The strong dollar has made U.S. manufacturers less competitive abroad and has been a significant headwind for the overall U.S. economy. With other central banks easing monetary policy and the Fed starting to tighten U.S. monetary policy, the divergence could drive the dollar higher. If so, the headwinds for the U.S. economy could strengthen. With this and other factors in play, the Fed could decide to raise rates more slowly than it now projects.

Rising risks mean nervous markets
January’s stock market declines reflect this risky environment. Nevertheless, though risks abound, there are opportunities. U.S. growth continues, and forward-looking indicators suggest that it may accelerate. Moreover, the perceptions of risk seem excessive.

Consequently, although it has been a difficult month, investors should remain calm. January’s events underscore the need for maintaining a diversified portfolio and a long-term perspective. Cautious optimism remains the appropriate stance, as history has shown that markets and economies consistently return to a growth path.

All information according to Bloomberg, unless stated otherwise.

Disclosure: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Barclays Capital government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities.

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Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagfher.com.

Authored by Brad McMillan, senior vice president, chief investment officer, at Commonwealth Financial Network.