Presented by Mark Gallagher

General Market News
• Treasury rates were largely range bound last week, as Federal Reserve (Fed) Chairman Jerome Powell’s midweek testimony to Congress did not contain major market-moving news. The 10-year Treasury yield started the week at 0.70 percent, slightly higher than last week’s opening yield of 0.66 percent. The story was the same on the longer end of the curve, with the 30-year opening at 1.44 percent, compared with 1.40 percent the week before.
• Last week, global equities rebounded from the previous week’s pullback as indices posted gains across the board. The rebound, led by the Nasdaq, favored growth and momentum companies. The Fed’s choice to purchase individual corporate bonds and to kick off its Main Street Lending Program were among the reasons for the move higher. In addition, there is speculation that a future infrastructure stimulus plan could be proposed. Sectors that fared best during the week included health care, technology, consumer staples, and consumer discretionary. Underperforming sectors were bond proxy sectors in utilities, energy, and REITs.
• On Tuesday, May’s retail sales report was released. Sales blew away expectations, increasing by 17.7 percent against forecasts for an 8.4 percent increase. This rebound shows consumers were more than ready to get out and spend as states started reopening. Car sales were a highlight during the month, increasing by more than 40 percent from April; however, even core retail sales, which strip out the impact of auto and gas sales, rose by a better-than-expected 12.4 percent. All things considered, this was a positive report that indicates the economic recovery may be swifter than originally anticipated.
• Also released Tuesday was the National Association of Home Builders Housing Market Index for June. This measure of home builder confidence rose from 37 in May to 58 in June, against expectations for a more modest increase to 45. This was one of the largest single-month increases on record, as home builders cited significantly higher prospective home buyer interest during the month. Although there remains a long way to go to return to the recent high of 78, set in December, this better-than-expected report is a good sign for future home construction as we enter the summer months, with state economies largely opened up to renewed construction work.
• Speaking of new home construction, May’s building permits and housing starts reports were released Wednesday. Here, the news was a bit disappointing, as both measures of new home construction came in below expectations. Starts rose by 4.3 percent, against forecasts for a 23.5 percent increase. Permits rose by a more encouraging 14.4 percent, against calls for a 16.8 percent increase. Although the increased pace of new home construction in May was welcome, it followed April declines of more than 26 and 21 percent for starts and permits, respectively, so there remains a long way to go before returning to pre-pandemic activity levels.

Source: Bloomberg, as of June 19, 2020

Source: Morningstar Direct, as of June 19, 2020

What to Look Forward To
On Monday, May’s existing home sales report was released. Sales fell by 9.7 percent during the month, against expectations for a 5.6 percent decline. Following a 17.8 percent decline in April, this disappointing result brought the annualized pace of existing home sales down to a nine-year low of 3.91 million. The declines were geographically widespread, with sales down by double digits on a year-over-year basis across all four major regions of the country. Before the pandemic hit, existing home sales showed solid growth in 2019 and the first two months of 2020, peaking at an annualized rate of 5.76 million in February. With mortgage rates near a three-year low and consumer confidence stabilizing in June, we can hope home sales may rebound in the upcoming months. As May’s disappointing results showed, however, the disruption to the housing market caused by the pandemic was severe. It’s likely the pace of home sales will take some time to recover to pre-pandemic levels.

We’ll get another look at the housing market with Tuesday’s release of the May new home sales report. New home sales are expected to rise by 1.1 percent after posting a surprise 0.6 percent increase in April. New home sales are a smaller and, often, more volatile portion of the housing market compared with existing home sales, but the anticipated increase would still be a positive sign for the overall market. Once again, the combination of low rates and improving consumer demand is expected to serve as a tailwind for new home sales as we head into the summer. One key area to monitor will be the pace of new home construction, as the slowdown caused by the pandemic may serve as a temporary headwind to new home sales, especially in supply-constrained markets. Nonetheless, the better-than-expected home builder confidence figures should support faster new home construction, which, in turn, would likely boost new home sales.

On Thursday, the preliminary durable goods orders report for May will be released. Durable goods orders are expected to increase by 10.5 percent, following a 17.7 percent decline in April. Much of the anticipated increase can be attributed to transportation orders, which can be especially volatile on a month-to-month basis. Core durable goods orders, which strip out the impact of transportation orders, are set to increase by 2.5 percent during the month, following a 7.7 percent decline in April. Core durable goods orders are often seen as a proxy for business investment, so while this anticipated increase would be a positive development, it would indicate business spending will likely face a longer path back to pre-pandemic levels compared with consumer spending, which has already showed signs of a swifter rebound.

Thursday will also see the release of the weekly initial jobless claims estimate for the week ending June 20. Economists expect initial claims to fall for the 12th consecutive week, down to 1.3 million from just more than 1.5 million the previous week. Although continued declines for initial claims would be welcome, the pace of reduction has slowed over the past few weeks, indicating the job market still faces significant stress despite reopening efforts. We will continue to monitor these weekly releases until we see claims returning to historically normal levels.

On Friday, May’s personal income and personal spending reports will be released. Incomes are expected to fall by 6 percent, following a surprising 10.5 percent increase in April. Incomes were boosted by onetime CARES Act payments in April, which are not expected to have a meaningful effect in May. Spending is set to increase by 8.6 percent, partially offsetting a 13.6 percent decline in April that was the worst monthly decline for personal spending since records began being kept in 1959. Once again, though the anticipated increase in spending would be a welcome development, it will likely take some time to recover from the damage to consumer spending caused by the pandemic, even if the pace of recovery may be faster than originally anticipated.

Finally, we’ll finish the week with Friday’s release of the second and final estimate of the University of Michigan consumer sentiment index for June. Economists expect it to remain unchanged from the midmonth preliminary estimate of 78.9, up from 72.3 in May and higher than initial estimates of 75 in June. The much-better-than-expected May jobs report and equity market rebound likely contributed to this better-than-expected preliminary result. Improving consumer sentiment has historically supported faster consumer spending growth, so a continued rebound for this index would bode well for June’s spending figures. Although the anticipated increase would be welcome, confidence would still sit well below its recent high of 101 in February, so there remains much work to be done to fully restore consumer sentiment.

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 Bloomberg Barclays US 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 Bloomberg Barclays US 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 Bloomberg Barclays US Municipal 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.

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.

© 2020 Commonwealth Financial Network ®

Presented by Mark Gallagher

General Market News
• Rates took a bit of a roller coaster ride last week, as the 10-year Treasury yield spiked to as high as 0.93 percent following the previous week’s sell-off in the bond market. In fact, most of last week’s rates came back down just about as fast as they spiked the week before. The 10-year opened at 0.66 percent on Monday. The 30-year reached a high of 1.75 percent over the same time frame, falling to 1.40 percent as of Monday morning. The 2-year, which reached a recent high of 0.23 percent, opened at 0.18 percent.
• Global equities sold off last week, as a caution from the Federal Reserve (Fed) and concerns over another increase in coronavirus cases moved investors to the sidelines. Fed Chairman Jerome Powell said Fed officials expect to keep rates near zero through at least 2022. As has been the case throughout the year, the tech-oriented Nasdaq was least affected. Indices such as the Russell 2000, which provides exposure to smaller businesses, were hit harder. Last week, we witnessed a reversal of the value trend seen in the prior three weeks. During that time, stocks that had been beat up by the virus rallied; this was flipped last week, as value sectors, such as energy, financials, industrials, and materials, were all hit hard. Sectors that held up best included technology, communication services, and consumer discretionary.
• On Wednesday, May’s Consumer Price Index was released. Consumer prices fell modestly by 0.1 percent during the month, against expectations for no change. This brought the pace of year-over-year consumer inflation to a paltry 0.1 percent. Core consumer prices, which strip out the impact of volatile food and energy prices, also declined by 0.1 percent for the month, against expectations to remain flat. The April inflation reports showed the massive deflationary pressure caused by the coronavirus pandemic. Looking forward, this pressure is expected to remain until economic activity picks up notably.
• Also on Wednesday, the Federal Open Market Committee released its rate decision at its June meeting. As expected, the Fed kept the federal funds rate unchanged. The Fed also released economic forecasts that painted a bleak picture for the near future, with the economy expected to face considerable risks over the short and intermediate term. The Fed predicts a 6.5 percent decline in gross domestic product this year and a year-end unemployment rate of 9.3 percent. As a response to this discouraging outlook, the Fed remains committed to keeping rates low for the foreseeable future. Although the forecasts were dire, the Fed’s commitment to provide as much support as necessary shows that the central bank is ready and willing to pull out all the stops to help stimulate the economy.
• On Thursday, May’s Producer Price Index was released. Producer prices increased by 0.4 percent during the month, surpassing estimates for 0.1 percent growth. This brought the year-over-year pace of producer deflation up to –0.8 percent, from –1.2 percent in April. Core producer prices, which strip out energy and food prices, fell by 0.1 percent during the month, bringing the pace of year-over-year core producer inflation to 0.3 percent. This marks a four-year low for year-over-year core producer inflation. As was the case with consumer inflation estimates, economists aren’t anticipating a swift increase in producer inflation, given the headwinds created by the pandemic and the expected moderate pace of economic recovery.
• We finished the week with Friday’s release of the preliminary estimate of the University of Michigan consumer sentiment survey for June. This measure of consumer confidence beat expectations, rising from 72.3 in May to 78.9 in June, against forecasts for a more modest increase to 75. This was the largest single-month increase for the index since 2016, indicating consumers reacted positively to reopening efforts that began in May. The better-than-expected May jobs report, along with strong equity market performance over the past few months, likely contributed to this result. Although this was certainly a welcome development, the index still sits well below its pre-pandemic high of 101, set in February.

Source: Bloomberg, as of June 12, 2020

Source: Morningstar Direct, as of June 12, 2020

What to Look Forward To
On Tuesday, May’s retail sales report is set to be released. Headline sales are expected to increase by 7.9 percent during the month, following a 16.4 percent decline in April. Although an increase would certainly be welcome, it’s important to remember that the pandemic caused headline sales to drop by a combined 23.4 percent between February and April. One of the major drivers of this anticipated increase in headline sales is a rise in auto and gas sales, which rebounded in May as reopening efforts took hold. Core sales, which strip out the impact of volatile auto and gas prices, are set to increase by 4.5 percent in May, following a 16.2 percent decline in April. Again, while the anticipated increase in core sales would be welcome, it will likely be a long time before the overall pace of sales returns to pre-pandemic levels. Because consumer spending accounts for the lion’s share of economic activity, this release will continue to be widely monitored.

May’s industrial production report will also be released Tuesday. Production is expected to rise by 3 percent during the month, following an 11.2 percent decline in April. Factories were largely shut down in April and began gradually reopening in May, which explains the anticipated rebound. Manufacturing output is expected to top that gain, with economists forecasting a 5.9 percent increase to follow the 13.7 percent decline in April. Looking forward, both industrial production and manufacturing output are expected to face headwinds created by low energy prices, lowered global demand, and disrupted supply chains due to the pandemic. Compared with service-based sectors, a swift recovery to pre-pandemic levels may be more difficult for the industrial sector.

The third major release scheduled for Tuesday is the National Association of Home Builders Housing Market Index for June. This measure of home builder confidence is slated to increase from 37 in May to 44 in June. This would mark the second consecutive month of increased home builder confidence, following the index’s drop to a seven-year low of 30 in April. Despite the anticipated increase, the index would sit far below its recent high of 76, set in December 2019. Home builders cited a steep fall in foot traffic from potential buyers due to the pandemic as a major driver of this decline in confidence. But, with the country reopening, potential buyers may come back faster than expected. Such a rebound would likely lead to a faster-than-expected recovery for home builder confidence and spending.

On Wednesday, May’s building permits and housing starts reports are set to be released. Economists expect to see a strong rebound in both measures of new home construction, with permits and starts expected to increase by 14.9 percent and 23.5 percent, respectively. Nonetheless, these solid results would represent only a partial rebound from April, when anticoronavirus measures caused permits to fall by 20.8 percent and starts to plummet by 30.2 percent. As was the case with home builder confidence, the forecasted rebound for permits and starts in May would be a positive development for the housing market. Still, even if estimates hold, this segment has a long way to go before returning to recent highs.

We’ll finish the week with Thursday’s release of the weekly initial jobless claims report for the week ending June 13. Economists expect that 1.295 million initial unemployment claims will be filed during the week, down from 1.542 million the week before. Continuing claims are also expected to fall, from roughly 20.9 million to 19.4 million. If estimates hold, this report would mark the 11th consecutive week with declining initial claims. Although this anticipated decline is welcome, initial and continuing claims sit well above historical norms, indicating the jobs market remains under significant stress despite reopening efforts that began in May. We will continue to monitor these important weekly releases until we see claims return to more normal levels.

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 Bloomberg Barclays US 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 Bloomberg Barclays US 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 Bloomberg Barclays US Municipal 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.

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.

© 2020 Commonwealth Financial Network ®

Presented by Mark Gallagher

General Market News
• The 10-year Treasury yield opened at 0.66 percent on Monday, while the 2-year came in at 0.17 percent and the 30-year at 1.43 percent. We are set to get some May economic numbers this week, which should give us a clearer view on where we stand as an economy. The Federal Reserve meets next week, and, while it has done a lot and has essentially asked Congress to step in, it should be interesting to see what members have to say when faced with hard May economic numbers.
• Global equities rallied last week, as investors grew optimistic after Dr. Anthony Fauci said a vaccine could be available by November or December. For the second week in a row, value continued to outperform as the positive news saw beaten-down value stocks bounce back. U.S. and China trade tensions picked up again as the U.S. suspended Hong Kong’s special tariff rates following the proposal of a new national security law there. Emerging markets understandably lagged the S&P 500 and Dow Jones Industrial Average for the week, while international markets outperformed amid European reopenings. The top-performing sectors were financials, industrials, REITs, and utilities. Underperforming sectors were communication services, energy, and technology.
• The Conference Board Consumer Confidence Index for May was released last Tuesday. Confidence rose from a downwardly revised 85.7 in April to 86.6 in May. This was slightly worse than expectations for an increase to 87 but still a step in the right direction. Consumer expectations for the future increased during the month; however, views of the present condition worsened modestly. Altogether, this was a largely positive report because it indicates consumer confidence may have bottomed in April and could be set to rebound as states continue to reopen. As hopes of a swift economic recovery largely rely on a quick rebound for consumer confidence and spending, this report will be watched closely.
• On Tuesday, April’s new home sales report was released. New home sales came in much better than expected, increasing modestly from a downwardly revised annual rate of 619,000 in March to 623,000 in April, against forecasts for a fall to 480,000. Despite this better-than-expected performance, the pace of new home sales is still down notably from its recent high of 717,000, set in January. We saw strong growth in new home sales in 2019, and this momentum continued into 2020 before the pandemic hit. Looking forward, the slowdown in new home construction in March and April will likely serve as a headwind for future new home sales because of lowered supply in key markets.
• On Thursday, the second estimate of first-quarter gross domestic product (GDP) growth was released. Economic growth was revised down from an annualized –4.8 percent to –5 percent. Personal consumption, the major driver of GDP growth in 2019, improved slightly to –6.8 percent annualized during the quarter, from an initial estimate of –7.6 percent. Despite this better-than-expected revision to consumption growth, this still represents the worst quarter for personal consumption since the second quarter of 1980. Although these very weak growth figures are concerning, they are likely just the tip of the iceberg; economists are forecasting a 33.5 percent annualized contraction for the economy in the second quarter.
• Thursday also saw the release of the preliminary estimate of April’s durable goods orders report. Orders came in slightly better than expected, falling by 17.2 percent during the month against forecasts for a 19 percent decline. As was the case in March, much of the decline in headline orders during the month can be attributed to a fall in volatile aircraft orders. Core durable goods orders, which strip out the impact of volatile transportation orders, came in much better than expected, falling 7.4 percent against calls for a 15 percent decline. While this result is a positive development, it still represents the largest single-month drop in core orders in more than a decade. Core durable goods orders are often used as a proxy for business investment, so this report indicates that already weak business spending in the first quarter likely worsened to start the second quarter.
• On Friday, April’s personal income and personal spending reports were released. Personal spending, which accounts for roughly two-thirds of total economic activity, fell by 13.6 percent during the month, worse than the expected 12.8 percent decline. This was the worst monthly decline in spending since records began in 1959. Personal incomes increased by 10.5 percent during the month, far surpassing estimates for a 5.9 percent decline. Incomes were boosted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act payments to consumers during the month. Despite the better-than-expected result for income growth, the historically bad spending highlights the massive disruption to consumer spending that shelter-in-place orders had during the month.
• Finally, we finished the week with Friday’s release of the second and final estimate of the University of Michigan consumer sentiment survey for May. Consumer confidence fell slightly during the month, down from 73.7 midmonth to 72.3 at month-end, against expectations for a modest increase to 74. Despite the modest decline, this still represents a step in the right direction after the index hit an eight-year low of 71.8 in April. This echoes the results from the Conference Board Consumer Confidence Index, released on Tuesday. As is the case with that report, this will be a widely followed release because it will give a glimpse into how consumers are reacting to the easing of shelter-in-place orders as we head into the summer.

Source: Bloomberg, as of May 29, 2020

Source: Morningstar Direct, as of May 29, 2020

What to Look Forward To
We started the week with Monday’s release of the Institute for Supply Management (ISM) Manufacturing index for May. This measure of manufacturer confidence increased modestly from 41.5 in April to 43.1 in May, against expectations for a larger increase to 43.8. While this gain was a positive development, this is a diffusion index, where values below 50 indicate contraction, so the index remains at a concerning level. The manufacturing industry was hard hit in April by factory shutdowns and a steep drop in global demand due to the pandemic, but efforts to reopen factories in May bolstered confidence modestly. While the factory openings should be a tailwind for manufacturer confidence in the short term, the drop in global demand will likely linger and serve as a headwind for a swift increase in this indicator.

On Wednesday, we will see the release of the ISM Nonmanufacturing index. This measure of service sector confidence is also expected to increase modestly, from 41.8 in April to 44 in May. This is another diffusion index, where values below 50 indicate contraction. So, while the projected May increase would be positive, confidence would still sit well below levels needed to support a swift economic recovery. Ultimately, while an uptick in business confidence would certainly be welcome, modest increases linked to reopening efforts would be unlikely to significantly increase business investment without a marked improvement in economic conditions.

On Thursday, the initial jobless claims for the week ending May 30 will be released. Economists expect to see an additional 1.8 million initial unemployment claims filed during the week, marking the ninth straight week of declining initial claims. This result would bring the total amount of initial claims filed during the pandemic to roughly 42 million. Despite the anticipated decline for initial claims in the last week of May, we will continue to closely monitor this weekly release until levels get closer to historical norms. We will also be keeping a close eye on the continuing claims report set to be released at the same time, to see if the decline the previous week is sustainable or a one-off result.

Thursday will also see the release of the April international trade report. The trade deficit is expected to narrow, from $44.4 billion in March to $41.5 billion in April. Previously released data for the trade of goods during the month showed exports falling by more than 25 percent in April, offsetting a 14.3 percent decline for imports over the same period. That data brought the trade gap for goods to its widest level in seven months. Looking forward, trade is expected to show continued weakness in the short term, as the disruptions caused by the pandemic should serve as a headwind for global trade growth.

We’ll finish the week with Friday’s release of May’s employment report. Economists expect to see 8 million additional jobs lost during the month, following more than 20 million job losses in April. This would bring the unemployment rate up to 19.5 percent, notably higher than the 14.7 percent unemployment rate reported in April. For context, this would be the worst result for unemployment since the Great Depression, when the unemployment rate was estimated to peak at just under 25 percent. Given the continued pace of mass layoffs throughout May, the unemployment report will likely reflect the truly devastating impact that anticoronavirus measures have had on the livelihood of millions of Americans.

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 Bloomberg Barclays US 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 Bloomberg Barclays US 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 Bloomberg Barclays US Municipal 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.

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.

© 2020 Commonwealth Financial Network ®