Weekly Market Update, October 8, 2018

Presented by Mark Gallagher

General market news  
•Rates have moved higher recently, and with the bond market closed on Monday, yields are as of October 5. The 10-year Treasury stands at 3.23 percent, and the 30-year and 2-year are at 3.40 percent and 2.88 percent, respectively. The yield curve—which had been flattening, leading to worries about inversion—has steepened over the last week or so. The Federal Reserve’s (Fed’s) optimism about the economy has helped. On top of a September hike in the federal funds rate to 2.25 percent, the Fed has expressed plans to raise rates in December, as well as three times in 2019.
•U.S. equity markets were mostly down last week. Investors appear to be moving out of equities in the face of rising Treasury yields and higher borrowing costs. Comments from Fed Chair Jerome Powell were seen as potentially hawkish; he stated that rates are still accommodative, and while they are moving toward a neutral level, they are still “a long way from neutral at this point.”
•Markets also were likely reacting to the new trade agreement announced by President Trump—the U.S.-Mexico-Canada Agreement (USMCA)—which, if approved, will replace NAFTA. Although this is viewed as a win for the U.S., some language in the agreement could indicate an even greater divergence between North American and Chinese trade deals in the future.
•Last week was a relatively quiet one for economic updates. On Monday, the Institute for Supply Management (ISM) Manufacturing index declined slightly, as expected, going from 61.3 to 59.8. This is a diffusion index, where values greater than 50 indicate expansion, so this is still a strong level. On Wednesday, the ISM Nonmanufacturing index surprised by rising to 61.6 from 58.5.
•On Friday, the September employment report came in with mixed results: 134,000 new jobs were added, short of the expected 185,000. This headline miss is likely not as bad as it seems at first glance. Previous months were revised up by 87,000, which helps offset the shortfall. The unemployment rate fell to 3.7 percent, which is the lowest rate since 1969.

 

Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 –0.95% –0.95% 9.52% 15.25%
Nasdaq Composite –3.18% –3.18% 13.75% 19.55%
DJIA 0.00% 0.00% 8.83% 18.75%
MSCI EAFE –2.34% –2.34% –3.31% 0.85%
MSCI Emerging Markets –4.48% –4.48% –11.64% –6.79%
Russell 2000 –3.78% –3.78% 7.30% 9.30%

Source: Bloomberg

 

Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.94% –2.53% –0.29%
U.S. Treasury –0.90% –2.55% –2.36%
U.S. Mortgages –0.97% –2.04% –1.84%
Municipal Bond –0.58% –0.97% –0.29%

Source: Morningstar Direct

 

What to look forward to
This week’s economic data digs into pricing and inflation, as well as gives us another look at consumer confidence.

On Wednesday, the producer prices report is expected to show a 0.2-percent increase in the headline index, which includes energy and food, for September. This would be up from a decline of 0.1 percent in August. There may be some upside risk here from energy prices and tariff-driven increases in other input prices, especially steel and electronics. The annual change, however, is expected to drop—from 2.8 percent to 2.7 percent—indicating that longer-term inflation pressures are moderating but still elevated above the Fed’s target level of 2 percent. The core index, which excludes energy and food, is also expected to increase 0.2 percent for September, up from a 0.1-percent decline in August. Here, though, the annual figure is expected to rise to 2.6 percent from 2.3 percent. Such an increase would be due largely to base effects, but tariffs are reportedly driving faster input inflation, which could worsen next month as tariffs on Chinese goods increase.

On Thursday, the consumer prices report is expected to show continued inflation. The headline index, which, again, includes food and energy, is expected to rise by 0.2 percent for September. This would be on top of a 0.2-percent increase in August. The annual figure is expected to drop from 2.7 percent in August to 2.4 percent in September on base effects. The core index is expected to rise from a 0.1-percent increase in August to a 0.2-percent increase for September. In addition, the annual figure is expected to rise from 2.2 percent to 2.3 percent. As with producer prices, these figures indicate that inflation continues to run above the Fed’s target, which should continue to drive interest rate increases.

Finally, the University of Michigan’s consumer confidence survey, released Friday, is expected to show confidence rising from 100.1 for September to 100.8 for October. This is a high level historically and suggests that consumers are not yet worried about the effects of a trade war. Combined with a strong labor market and the fact that the stock market remains close to its high, this should continue to support consumer spending and economic growth.

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.

© 2018 Commonwealth Financial Network®

Weekly Market Update, October 1, 2018

Presented by Mark Gallagher

General market news
• Volatility was back last week. The 10-year Treasury rate bounced between 3.11 percent and 3.02 percent. Given how flat the yield curve is today—with a difference of only 25 basis points between the 2-year and 10-year—a move of 9 basis points on the 10-year is significant. Further, the Federal Reserve (Fed) raised rates last week and is projected to raise them again over the next 12 months. As such, the longer end of the curve will see volatility, while the short end will move up in tandem with the federal funds rate. One note from last week’s Fed meeting is that the Fed no longer considers its stance as accommodative. Also, with the federal funds rate above 2 percent and the long-term target at 3 percent, the Fed is likely in the later stages of raising rates.
• U.S. equity markets were mixed last week, as trade tensions and eurozone financial uncertainty weighed on the markets. The Wall Street Journal reported that China canceled its upcoming trade talks with the U.S., as China was displeased with the recent additional $200 billion in tariffs. It is expected that President Trump may soon offer a final $267 billion in tariffs. The news weighed heavily on the materials sector, which was down more than 4.4 percent on the week. The financials sector was also down by more than 4 percent on the week.
• The Italian government agreed to a 2.4-percent budget deficit target, which could potentially be a breach of its EU obligations. Adding to the European volatility was continued uncertainty over Brexit, as Theresa May and her cabinet continue to work to come to an agreement with Europe.
• Last week was a busy one for economic updates. On Tuesday, the Conference Board Consumer Confidence Index defied expectations for a slight pullback, instead rising to an 18-year high. On Wednesday, new home sales also came in better than expected, with 3.5-percent growth against expectations for 0.5-percent growth.
• On Thursday, the final measure of second-quarter gross domestic product growth came in at 4.2 percent. Also on Thursday, August’s durable goods orders came in at a very strong 4.5 percent due to a large uptick in aircraft orders.
• On Friday, the August personal income and personal spending reports both showed growth of 0.3 percent.

Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 –0.51% 0.57% 10.56% 18.35%
Nasdaq Composite 0.76% –0.70% 17.48% 26.00%
DJIA –1.07% 1.97% 8.83% 20.89%
MSCI EAFE –0.85% 0.88% –0.98% 3.80%
MSCI Emerging Markets –0.25% –0.54% –7.39% 0.43%
Russell 2000 –0.86% –2.41% 11.51% 15.41%

Source: Bloomberg

Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.64% –1.60% –1.22%
U.S. Treasury –0.93% –1.67% –1.66%
U.S. Mortgages –0.61% –1.07% –0.95%
Municipal Bond –0.65% –0.40% 0.34%

Source: Morningstar Direct

What to look forward to
This is a very busy week for economic news. We’ll have looks at business sentiment across the board, the trade balance, and, most important, the job market.

On Monday, the Institute for Supply Management (ISM) Manufacturing index dropped slightly. It went from 61.3 to 59.8, after an unexpected surge in August. This is a diffusion index, where values above 50 indicate expansion and below 50 indicate contraction. So, even with the decline, this result remains quite strong. In general, the pullback looks to have come from slowing global growth. More specifically, it may have resulted from the recent appreciation in the dollar, which has been increasing the costs of U.S. products to foreign buyers. Uncertainty over trade policy remains a headwind as well. With manufacturing growth slowing, the pullback is reasonable. Even with the pullback, however, sentiment remains quite strong and positive for the economy as a whole.

On Wednesday, the ISM Nonmanufacturing index is also expected to pull back slightly—from 58.5 to 58—after an increase in August. As with the manufacturing report, this is a diffusion index. So, it should continue to indicate expansion on strong retail sales growth, as well as strong regional surveys. With consumer confidence high and spending growth solid, this indicator should remain positive for the economy as a whole, despite the small expected decline.

On Friday, the international trade report is expected to show the trade deficit has worsened. It is anticipated to go from $50.1 billion to $50.7 billion. We already know from the advance report that the trade deficit in goods widened, as export growth has now dropped back even as imports have increased. As such, there may be some additional downside risk to this report. Overall, if the numbers come in as expected, trade will likely be a drag on third-quarter growth.

Finally, on Friday, the employment report will be released. It is expected to show that job growth pulled back to a still healthy 188,000 in September from a strong August report of 201,000. The unemployment rate is expected to drop from 3.9 percent to 3.8 percent. Wage growth should also pull back a bit. It should go from 0.4 percent in August to 0.3 percent for September on a monthly basis and from 2.9 percent to 2.8 percent on an annual basis. If these numbers come in as anticipated, this would be another healthy report and signal continued economic growth. It would also likely support another rate hike from the Fed in 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 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.

© 2018 Commonwealth Financial Network®

Weekly Market Update, September 24, 2018

Presented by Mark Gallagher

General market news  
• Rates continue to move higher, testing certain resistance levels. The 10-year Treasury yield opened at 3.07 percent on Monday; less than a month ago, it was at 2.80 percent. The 2-year now stands at 2.80 percent, while the 30-year is at 3.20 percent. The difference in rates between the short end and the long end moved slightly higher last week but, in general, continues a downward trend. The Federal Reserve (Fed) is likely to raise the federal funds rate on Wednesday, which could tighten the spread.
• U.S. equity markets were mixed last week. The Dow Jones Industrial Average and the S&P 500 both hit new all-time highs, while the tech-oriented Nasdaq Composite Index posted a small loss. Despite an escalation in U.S.-China trade tensions, markets seemed to shrug off the news.
• On Monday, President Trump announced plans to impose tariffs on an additional $200 billion in imported Chinese goods. The tariffs would go into effect this week and begin at 10 percent, before ramping up to 25 percent in 2019. China responded with an additional 5-percent to 10-percent tariff on $60 billion in U.S. imports. It remains uncertain whether the U.S. or China will move forward with these plans, but the market seemed to shrug off the news or take peace in the lower rates. In other news, a 0.7-percent decline in the U.S. dollar helped support emerging market stocks last week, easing the burden of their dollar-denominated debt.
• Last week, several housing-related economic updates were released. On Tuesday, the National Association of Home Builders Housing Market Index remained flat at 67. This result is down from highs earlier this year but still signals confidence among home builders.
• On Wednesday, housing starts increased, while building permits declined slightly. On Thursday, existing home sales came in unchanged for the month, against expectations for a slight increase.

 

Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 0.86% 1.08% 11.13% 19.44%
Nasdaq Composite –0.28% –1.45% 16.59% 25.67%
DJIA 2.25% 3.07% 10.01% 22.32%
MSCI EAFE 2.91% 1.78% –0.14% 4.58%
MSCI Emerging Markets 2.28% –0.25% –7.16% –2.53%
Russell 2000 –0.53% –1.56% 12.48% 20.07%

Source: Bloomberg

 

Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.81% –1.76% –1.36%
U.S. Treasury –1.06% –1.79% –1.93%
U.S. Mortgages –0.80% –1.25% –1.03%
Municipal Bond –0.82% –0.57% –0.11%

Source: Morningstar Direct

What to look forward to
This week is a busy one on the economic front. It gives us a solid look at the consumer’s thoughts and actions, as well as business activity and housing data.

On Tuesday, the Conference Board releases its consumer confidence survey. It is expected to pull back slightly, from 133.4 to 131.5. This result would still leave the index at a multiyear high and would signal continued spending growth. If the number comes in as expected, it will be positive for the economy.

On Wednesday, the new home sales report is expected to tick up slightly—from 627,000 to 631,000—continuing a gradual recovery from an earlier slowdown. If the number comes in as expected, it will signal that while housing growth continues to slow, it remains at healthy levels overall.

Also on Wednesday, the Fed meeting concludes. Markets expect the Fed to raise interest rates by 25 basis points on continued growth and rising inflation. The announcement will be followed by a press conference, which markets will be watching closely for hints of how the Fed sees future rate increases playing out. This rate increase is expected, so it should have minimal impact.

On Thursday, the headline index of the durable goods orders report is expected to bounce significantly. It should go from a 1.7-percent decline in July to a 1.7-percent increase in August, on a rise in airplane orders. As these numbers suggest, the headline index is notoriously volatile. The core index, which excludes transportation and is a much better economic indicator, is expected to improve from 0.1-percent growth in July to 0.4-percent growth in August, on growing capacity constraints in many businesses. This again would be a healthy level of growth.

On Friday, the personal income and spending report is expected to show that personal income rose by 0.4 percent in August, up from 0.3 percent in July, on continued strong job growth and faster wage growth. There may be some upside risk here. Personal spending is expected to fall from 0.4 percent in July to 0.3 percent in August, as retail sales surveys showed modest growth and auto sales declined. Despite the decline, this would remain a healthy level of spending growth and would be well supported by income growth.

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.

© 2018 Commonwealth Financial Network®

 

Weekly Market Update, September 17, 2018

Presented by Mark Gallagher

General market news  
• Rates moved higher last week. The 10-year Treasury yield went from 2.87 percent to more than 3 percent this morning. The 3-year bond is now yielding what the 10-year was last week, and the 2-year is yielding what the 10-year was two weeks ago. As rates continue to compress and push up closer to a ceiling, the bond market seems to be telling us that while the economy looks good, there are factors indicating a recession in the future. The Federal Reserve (Fed) seems committed to raising rates. Keep in mind, however, that the Fed uses its “language” as a policy tool as well.
• All three major U.S. indices, the Russell 2000, and both the MSCI EAFE and MSCI Emerging Markets indices were up last week. Both improvement in fundamentals and the expectation of resumed trade talks between the U.S. and China were also in the news. The Wall Street Journal reported on Wednesday that Treasury Secretary Steven Mnuchin had reached out to continue trade talks with China. This was confirmed by the Chinese Foreign Ministry, which had reportedly welcomed the offer. Further, the Turkish Central Bank surprised last week when it increased the one-week repo rate by 625 basis points. This move followed the country’s continued currency weakness after the U.S. doubled its tariffs of Turkish steel and aluminum last month.
• Despite both Goldman Sachs and Stifel raising concerns over a potential peak in the memory chip cycle, the S&P 500’s technology sector posted a 1.83-percent gain. This move was supported both by Qualcomm announcing $16 billion of its common stock as the first phase of its $30 billion buyback plan and by a 1.2-percent move in Apple following the release of three new iPhones and a new version of the Apple watch.
• Economic news regarding inflation and consumer spending was released last week. On Wednesday, the Producer Price Index declined by more than expected, leaving annual inflation for producers at 2.8 percent. On Thursday, the Consumer Price Index showed a similar decline, with annual inflation of 2.7 percent.
• On Friday, August retail sales came in lower than expected at 0.2-percent growth month-over-month. July’s figure was revised upward, however, accounting for the lower-than-expected growth in August.

 

Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 1.21% 7.33% 10.18% 18.68%
Nasdaq Composite 1.39% 6.90% 16.92% 25.90%
DJIA 0.94% 8.37% 7.59% 20.47%
MSCI EAFE 1.78% –0.60% –2.96% 2.19%
MSCI Emerging Markets 0.60% –2.91% –9.23% –3.97%
Russell 2000 0.54% 5.03% 13.08% 22.36%

Source: Bloomberg

 

Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.55% –1.51% –1.37%
U.S. Treasury –0.73% –1.46% –1.95%
U.S. Mortgages –0.52% –0.98% –0.97%
Municipal Bond –0.46% –0.21% –0.01%

Source: Morningstar Direct

What to look forward to
This week’s economic data is all about housing.

On Tuesday, the National Association of Home Builders survey will be released. It is expected to tick down a bit further—from 67 in August to 66 in September—for the third month in a row. There may be some upside risk here. Although the industry continues to suffer from labor shortages and slowing housing demand, dropping lumber prices and an increase in permits may signal improved sentiment. That being said, this survey has shown declining confidence for several months now.

On a similar note, the housing starts report, released on Wednesday, is expected to show further recovery after a significant drop in June. It should rise from 1.17 million in July to 1.23 million (annualized) in August. Here again, this report will be constrained by rising supply and weakening demand. Even if it comes in as expected, it will still be below the levels from earlier this year.

Finally, on Thursday, the existing home sales report is also expected to show sales rising from 5.34 million in July to 5.38 million in August. This would be a partial recovery, but as with new home sales, it will be below the levels of the first half of the year.

Overall, while some recovery is expected from the weak results of last month, the data will likely show that housing continues to slow.

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.

© 2018 Commonwealth Financial Network®