Presented by Mark Gallagher

Markets Rebound in October

Equity markets showed signs of improvement in October, helping offset September losses. The S&P 500 gained 8.1 percent during the month, while the Nasdaq rose 3.94 percent. The Dow Jones Industrial Average (DJIA) experienced the best month of the three major indices, soaring 14.07 percent. Although these solid results were encouraging, all three indices remain down for the year.

That positive performance coincided with improving fundamentals. As of October 31, with 53.6 percent of companies having reported actual earnings, the blended earnings growth rate for the S&P 500 in the third quarter was 3.8 percent, according to Bloomberg Intelligence. At the start of earnings season, the growth rate was expected to be 2.6 percent. Over the long run, fundamentals drive market performance, so better-than-expected earnings growth was an encouraging signal, even though its pace has slowed this year.

Although fundamentals were supportive during the quarter, technical factors were mixed. Both the S&P 500 and Nasdaq finished the month well below their respective 200-day moving averages, marking seven consecutive months with both finishing below trend. The DJIA, on the other hand, ended above trend for the first time since March. The 200-day moving average is an important technical indicator because prolonged breaks above or below this level can signal shifting investor sentiment for an index. Continued technical weakness for the S&P 500 and Nasdaq should be monitored.

International equities were mixed. The MSCI EAFE Index increased 5.38 percent, while the MSCI Emerging Markets Index lost 3.09 percent. Emerging markets were hurt by the stronger dollar and a sell-off in Chinese equities, which was caused by uncertainty surrounding the country’s economic outlook. Technicals for developed and emerging markets were challenging; both indices finished below trend. In fact, they have ended every month this year below their respective 200-day moving averages, indicating continued investor unease with international stocks.

Fixed income markets continued to experience losses due to rising interest rates. The 10-year Treasury yield rose from 3.83 percent at the end of September to 4.1 percent at the end of October. That marked the first time the 10-year yield finished a month above 4 percent since May 2008, highlighting the rise in interest rates over the past year. The Bloomberg Aggregate Bond Index declined 1.3 percent.

Although investment-grade bonds experienced losses, high-yield fixed income fared better. High-yield credit spreads declined notably, dropping from 5.43 percent to 4.63 percent. Those declining credit spreads helped the Bloomberg U.S. Corporate High Yield Index gain 2.6 percent.

Interest Rate Uncertainty Remains

Interest rate volatility continued, as investors remained concerned about higher rates from the Federal Reserve (Fed) in the short term. The Consumer Price Index showed that consumer inflation accelerated, leading to higher fixed income yields due to expectations for additional Fed rate hikes. The central bank remains committed to tightening monetary policy to combat inflation, and additional increases are expected at its December and February meetings.

Until we see consistent evidence that higher rates are leading to less inflationary pressure, short-term interest rate uncertainty will remain. Although the impact of higher rates on equity markets was muted last month, we’ve seen how higher rates can hurt markets throughout the year, so continued short-term interest rate uncertainty presents a risk to markets that should be monitored.

Housing Continues to Slow

The housing sector is one area where we have seen direct evidence of a rate-induced slowdown. Existing home sales declined in September for the ninth consecutive month. The annualized pace of existing home sales is at its lowest since Covid lockdowns began in 2020, highlighting the slowdown in housing sales over the past year. Mortgage rates continued to rise, reaching 7.3 percent before retreating modestly to 7.22 percent. In a sign that the slowdown in sales has begun to affect prices, the Case-Shiller 20-City Composite Home Price Index fell 1.3 percent in August.

Although prices remain up year-over-year, the slowdown in sales and monthly decline in prices indicate that higher rates are starting to lower inflationary pressure in the housing sector. In the medium to long run, this should help support the Fed’s attempts to combat inflation across the economy. At the moment, however, still-high prices on a year-over-year basis signal that further home price declines may be ahead.

Economy Remains Solid

Despite the slowdown for the housing sector, overall economic growth remained on track. The advanced estimate for third-quarter GDP showed that the economy grew at an annualized rate of 2.6 percent, better than economist estimates and an encouraging rebound after two quarters of contraction. This result was supported by better-than-expected personal consumption growth during the quarter, an encouraging sign that economic fundamentals remain solid.

September saw 263,000 jobs added, surpassing expectations. This helped drive the unemployment rate to a pandemic-era low of 3.5 percent during the month. The job market, an area of strength throughout the economic recovery, has helped support gains in personal income and spending this year. September’s personal spending report showed that consumer spending held up well. In fact, as shown in Figure 1, consumer spending remained resilient during the month and has been largely consistent this year, other than a decline in July.

Figure 1. Personal Spending, October 2019–Present

Business spending also remained healthy; headline durable goods orders increased in September, and August’s results were revised upward. Although business confidence declined modestly, continued spending growth was encouraging.

Risks Cloud Short-Term Outlook

Market and economic updates were largely positive, but there remain risks to monitor. November midterm elections are a source of uncertainty that could lead to market turbulence depending on the outcomes; this uncertainty should be resolved soon, however. The Fed also remains a risk because it could scare investors and cause further interest rate instability if it indicates it plans to raise interest rates higher for longer to combat inflation.

Looking abroad, several risks remain, with the continued Russian invasion of Ukraine a primary risk. Although the market impact of the invasion has diminished, the possibility for an escalation and further instability remains. The slowdown in China and tighter monetary policy globally may also affect the U.S. economy and markets.

Despite these risks to the short-term outlook, market resilience was a positive development that signals many of the dangers may already be priced in. With fundamentals continuing to show signs of improvement, downside risks may be contained. Looking ahead, opportunities exist if fundamental improvements continue for the economy and short-term risks remain muted.

Ultimately, though the potential for short-term turbulence remains, continued growth remains the most likely outcome over the medium to long term. Given the potential for short-term uncertainty, a well-diversified portfolio that matches investor timelines with goals remains the best path forward for most. As always, if concerns remain, reach out to your financial advisor to discuss your plan.

All information according to Bloomberg, unless stated otherwise.

Disclosure: Certain sections of this commentary contain forward-looking statements 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 Bloomberg 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 Bloomberg government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. One basis point is equal to 1/100th of 1 percent, or 0.01 percent. The Case-Shiller 20-City Composite Home Price Index tracks changes in the price of residential real estate in 20 major metropolitan regions in the U.S.

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 Brad McMillan, CFA^®, CAIA, MAI, managing principal, chief investment officer, and Sam Millette, manager, fixed income, at Commonwealth Financial Network^®.

© 2022 Commonwealth Financial Network^®

Presented by Mark Gallagher

General Market News
• On Wednesday, the Federal Open Market Committee (FOMC) interest rate decision from the September 21–22 meeting was announced. The committee hiked the policy rate by 75 basis points (bps), bringing the upper limit of the target federal funds rate to 3.25 percent, which hasn’t been breached since early 2008. This is the third consecutive rate increase of 75 bps as the Federal Reserve (Fed) continues its fight against inflation. The action was widely expected by markets and economists as the latest Consumer Price Index (CPI) report for August showed stubbornly high consumer prices, supporting the continuation of hawkish monetary policy. The FOMC’s dot plot of members’ future rate expectations was also released on Wednesday, showing nearly all committee members expect the central bank’s rate to reach somewhere in the range of 4–4.5 percent by the end of 2022. Fed Chairman Jerome Powell has been setting the expectation that there is plenty more economic discomfort to endure before its job is complete, saying “We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t.” U.S. Treasury yields were up across the curve last week. The 2-year, 5-year, 10-year, and 30-year rose 34 bps (to 4.21 percent), 37 bps (to 4 percent), 31 bps (to 3.76 percent), and 14 bps (to 3.66 percent), respectively.
• The equity market continued to feel pain as the Fed remains steadfast in its efforts to fight inflation. In his eight-minute speech last month, Chair Powell highlighted that there may be some short-term and this is what we’ve seen in the markets the last two weeks—particularly in small-caps and growth stocks since they are more susceptible to higher rates as higher costs of doing business lead to compression in valuations and future growth potential. Equity investors flocked to save haven areas in consumer staples, utilities, and health care as cyclical growth stories in energy, consumer discretionary, and REITs came under heavy selling.
• Aside from the key focus on Fed policy, there were also a number of releases related to housing and Purchasing Managers’ Index (PMI) data. Key components of the housing data included building permits, housing starts, mortgage applications, and existing home sales. The data was mixed with disappointing building permits and better-than-expected existing home sales. Building permits fell 10 percent month-over-month in August, which was well below expectations for 4.7 percent. Housing starts, on the other hand, rose 12.2 percent over the same period. Weekly mortgage applications rose 3.8 percent while existing home sales fell by 0.4 percent in the month of August after falling 5.9 percent in July.
• Friday saw the release of the PMI for services, manufacturing, and the S&P Global U.S. Composite. The services PMI increased to 49.2 from 43.7, leaving the survey still in the contractionary camp below 50 but better than July. The manufacturing PMI moved up slightly to 51.8, from 51.5 in the prior month. Lastly, the S&P Global U.S. Composite came in at 49.3, up from 44.6 in August. The data shows an economy still facing headwinds in conditions but potentially easing for the month of September.

Source: Bloomberg, as of September 23, 2022

Source: Morningstar Direct, as of September 23, 2022

What to Look Forward To
On Tuesday, we expect the release of the Conference Board Consumer Confidence Index for September. Consumer confidence rose in August after declining for three consecutive months, so it will be interesting to see where September’s report stands. Inflation remains elevated, though expectations for longer-term inflation continue to moderate and offer light at the end of the tunnel. The index surprised to the upside in August, posting a 103.2 compared with predictions for a reading of 98. September’s survey shows an expectation for a 104.5 reading. Although the absolute value of the index is helpful only when comparing current confidence levels to those of the 1985 base year (index, 1985 = 100), we rely on the month-over-month changes in the index’s level as a directional indicator of consumer confidence.

Tuesday will also see the report on new home sales for August. Surveyed economists expect to see that 500,000 new single-family homes were sold over the month, compared with July’s total of 511,000. That would be a 2.2 percent month-over-month decline, compared with the prior month-over-month decline of 12.6 percent. Although that points to expectations for a slowing decline, new home sales have been falling steadily since the December 2021 report came in at 839,000. This downward trend comes as mortgage rates continue to soar, with 30-year fixed rate loans approaching an average of 6.5 percent.

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 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 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 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. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

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.
© 2022 Commonwealth Financial Network®

Presented by Mark Gallagher

General Market News
• Although August is an off month for Federal Open Market Committee (FOMC) meetings, Federal Reserve (Fed) Chair Jerome Powell still had an opportunity to provide forward guidance and steer the markets through his much-anticipated appearance at the annual Economic Symposium in Jackson Hole, WY last week. Powell took a strongly hawkish tone; he made it clear that more rate hikes are coming and fighting inflation is his top priority despite the pain that many households will likely experience as a result. This comes as the Chicago Fed’s National Financial Conditions Index (NFCI) pointed to loosening economic conditions in most of July and August, which is a trend the Fed is eager to put into reverse—especially after already hiking rates by a historic 75 basis points (bps) at the past two FOMC meetings. From here, markets will look toward the Fed’s September meeting for the next rate hike and additional economic guidance as we near the final quarter of 2022. U.S. Treasury yields were up across the curve last week. The 2-year, 5-year, 10-year, and 30-year rose 9 bps (to 3.38 percent), 8 bps (to 3.19 percent), 11 bps (to 3.07 percent), and 8 bps (to 3.28 percent), respectively.
• Equity markets sold off heavily last week as the Fed took center stage at the Jackson Hole retreat. Most of the selloff came on Friday following Powell’s comments regarding rate hikes to push inflation toward the Fed’s long-term target of two percent over the economic cycle. While this move was expected, the Chairman’s live press conference surprised many investors. As a result, several sectors, including technology, consumer discretionary, and industrials, reversed course despite performing well during the recent rally. Sectors that held up better were those that benefit from sustained inflation, such as energy, materials, utilities, and real estate. Future employment reports and inflation reports will be closely monitored as the Fed continues to drive demand back down to hit its target.
• On Wednesday, the preliminary July durable goods orders report was released. Headline durable goods orders growth came in below expectations, with the report showing that orders were unchanged against calls for a 0.8 percent increase. This miss was due to a slowdown in volatile transportation orders during the month. Core durable goods orders, which strip out the impact of transportation, increased 0.3 percent against calls for a 0.2 percent rise. Core durable goods orders are often viewed as a proxy for business investment, so this solid result signaled continued business spending.
• On Friday, the personal income and personal spending reports for July were released. Personal income increased 0.2 percent against calls for a 0.6 percent increase. This was the 10th consecutive month with income growth, and, though the increase in July came in below expectations, this was still a positive result. Spending also failed to meet expectations, with the report showing a 0.1 percent increase against calls for a 0.5 percent rise. This follows a 1 percent rise in spending in June and marks seven consecutive months with increased spending. Overall, these reports showed that consumers were still willing and able to spend during the month, which was a good sign for overall economic growth.

Source: Bloomberg, as of August 19, 2022

Source: Morningstar Direct, as of August 19, 2022

What to Look Forward To
On Tuesday, the Conference Board Consumer Confidence Index for August is set to be released. Economists expect confidence to increase modestly during the month, with the index set to rise from 95.7 in July to 97.4. If estimates hold, this would end a streak of three consecutive months with declining confidence. Despite the anticipated improvement for the index, it is expected to remain well below the pandemic-era high of 128.9 from June 2021. It’s likely we’ll need to see a continued slowdown in inflationary pressure before the index can recover to recent highs.

Friday will see the release of the August employment report. Economists expect to see that 300,000 jobs were added during the month after beating expectations in July with 528,000 jobs added. If estimates hold, this would represent a strong month of job growth on a historical basis and could support Fed plans for tighter monetary policy at the central bank’s September 21 meeting. The underlying data is expected to show signs of a strong labor market; the unemployment rate is set to remain unchanged at 3.5 percent, while average hourly earnings growth is expected to slow modestly.

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 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 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 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. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

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.
© 2022 Commonwealth Financial Network®

Presented by Mark Gallagher

General Market News
• Last week’s inflation reports showed encouraging signs of softening, but the Federal Reserve (Fed) is still far from out of the woods and is looking for much stronger signs of moderation. For July, the Producer Price Index (PPI) fell 0.5 percent (against market estimates of a 0.2 percent increase) and the Consumer Price Index (CPI) showed a price increase of 8.5 percent on a headline basis (against market estimates of an 8.7 percent increase). Despite these mildly positive signs, there is still plenty of work to be done and many market participants expect the Fed to consider a 50 or 75 basis point (bp) rate hike at the September FOMC meeting. The U.S. Treasury yield curve saw modest changes last week. The 2-year and 30-year fell 1 bp (to 3.2 percent) and 3 bps (to 3.13 percent), respectively, while the 5-year and 10-year rose 6 bps (to 2.97 percent) and 8 bps (to 2.86 percent), respectively.
• Equity markets rallied last week as both consumer and producer inflation came in lower than expected, offering the first sign of relief from rising prices since the second quarter of 2021. While inflation remains well above long-term norms, this represents the first hint of potential easing moving forward. It’s important to note that a main contributor to the inflation report was a monthly decline in fuel prices, which are more volatile than items such as housing and impact the inflation data on a lag. Despite the softer data on inflation, performance was mixed. Sectors sensitive to inflation, such as energy, financials, materials, and REITs, were among the best performers. Consumer staples and health care were among the worst performers. This week will see numerous reports from retailers such as Walmart (WMT), Home Depot (HD), Lowes (LOW) TJX Companies (TJX), Target (TGT), Estee Lauder (EL), and Ross Stores (ROST).
• On Wednesday, the July Consumer Price Index report was released. Consumer inflation came in below expectations, with headline prices remaining unchanged in July against calls for a 0.2 percent increase. On a year-over-year basis, consumer prices were up 8.5 percent, below the 9.1 percent increase in June and economist estimates for an 8.7 percent rise. Much of the slowdown in headline prices was due to falling gas prices; however, even core inflation showed signs of moderating. Core consumer prices, which strip out energy and food prices, increased 0.3 percent, well below the 0.7 percent increase in June and economist estimates for a 0.5 percent rise.
• Thursday saw the release of the July Producer Price Index report. Producer prices also showed signs of slowing inflation. Headline producer prices fell 0.5 percent against calls for a 0.2 percent increase, marking the first monthly decline for producer prices in more than two years. Producer inflation cooled on a year-over-year basis, too. Core producer prices, which strip out volatile energy and food prices, increased 0.2 percent during the month and 7.6 percent year-over-year, failing to meet economist estimates. All in all, the two inflation reports showed positive signs of cooling inflationary pressure, but it’s likely the Fed will want to see continued evidence of slowing inflation.

Source: Bloomberg, as of August 12, 2022

Source: Morningstar Direct, as of August 12, 2022

What to Look Forward To
On Wednesday, the FOMC meeting minutes from the Fed’s July meeting will be released. The Fed hiked the federal funds rate by 75 bps at that meeting, and economists and investors will monitor the minutes for hints about future Fed plans. Although strong job growth and cooling inflationary pressure in July were encouraging, the central bank is still expected to tighten monetary policy throughout the rest of the year. Markets are pricing in a rate hike of 50 bps at the Fed’s next meeting on September 21, with additional hikes expected in November and December.

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 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 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 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. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

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.

© 2022 Commonwealth Financial Network®