Presented by Mark Gallagher

General market news
• Since reaching a high of 2.41 percent on November 19, the yield on the 10-year Treasury has hovered around 2.34 percent. The 30-year has moved back below 2.80 percent—a level it has reached only a few times in the past year. Meanwhile, the 2-year is back above 1.75 percent. As the short end of the curve moves higher and the long end maintains its levels or moves lower, the flattening yield curve is increasingly something we need to pay attention to.
• Markets were up across the board during the holiday-shortened week. Technology stocks helped support the advance of the Nasdaq Composite and the S&P 500 Index, as Apple and Amazon posted gains of 2.83 percent and 4.97 percent, respectively. In fact, the S&P notched a new record high on November 21.
• Other top-performing sectors included telecom, industrials, and consumer discretionary. High expectations for the retail space should help consumer discretionary stocks. Earlier this month, Alibaba’s (BABA) Singles’ Day generated $25.3 billion in sales. Black Friday and Cyber Monday are expected to follow this strong performance. Those sectors that lagged on the week were consumer staples, utilities, and financials.
• Last week saw existing home sales come in very close to the consensus estimate. The number of homes sold increased 2 percent over the previous month, but sales were down 0.9 percent from last year. Because demand remains strong, supply continues to dwindle; it fell 3.2 percent, to 1.8 million homes.
• Durable goods orders were released on Wednesday, coming in well below the consensus with a decline of 1.2 percent month-over-month. Expectations were for a 0.4-percent increase. Commercial aircraft orders declined significantly but are expected to bounce back in November. Removing transportation, durable goods orders increased 0.4 percent, and the previous report was revised upwards by 0.4 percent as well.
• The University of Michigan consumer sentiment survey came in slightly above the consensus at 98.5—a sign that consumers’ confidence in the economy remains strong.

Source: Bloomberg

Source: Morningstar Direct

What to look forward to
This week, we’ll get a detailed look at the consumer, as well as sentiment at manufacturing companies.

On Tuesday, the Conference Board will release its confidence survey. The reading is expected to pull back a bit from a 16-year high of 125.9 in October to a still very high 124.0 in November. Strong job and stock markets should keep the index high, but rising gas prices may temper results. Even with the expected pullback, confidence is unusually high, and consumers are feeling very good. This is consistent with faster growth.

On Thursday, the personal income and spending reports will show whether consumers’ behavior is in line with confidence levels. Personal income growth is expected to pull back slightly, from a strong 0.4 percent in September to a still healthy 0.3 percent in October. Faster job growth in the aftermath of the hurricanes was offset by slower wage growth, so there may be some downside risk here. Personal spending growth also is expected to pull back from a 1-percent gain in September—when vehicle sales and rising gas prices buoyed growth—to a healthy gain of 0.3 percent in October. If the data comes in as expected, this will be a positive result for consumers, who represent the largest part of the economy.

Finally, on Friday, the Institute for Supply Management’s survey of manufacturing businesses is likewise expected to pull back from October’s seven-year high of 58.7 to 58.4. This is a diffusion index, where numbers above 50 indicate expansion. So, even with a small pullback, this index would still suggest strong growth. With declines in similar surveys, there may be more downside risk here, but the indicator would still be quite positive even with a larger pullback.

Although there may be some weakening of the data this week, it will be from very high levels and so nothing to worry about. Overall, this week’s data should keep pointing toward 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.

© 2017 Commonwealth Financial Network®

Presented by Mark Gallagher

General market news
• The yield on the 10-year Treasury opened this Monday at 2.39 percent, up from last week’s low of 2.30 percent. The 30-year opened at 2.87 percent, also up from last week’s low of 2.79 percent. The 2-year continues to grind higher, opening at 1.66 percent on Monday, its highest level since 2008, as the yield curve continues to flatten.
• All three major U.S. indices ticked slightly lower last week. The Dow Jones Industrial Average was down 0.35 percent, and the S&P 500 and Nasdaq Composite indices both were down 0.14 percent. This downturn snaps eight consecutive weeks of gains for U.S. equity markets. The top-performing sectors included real estate, consumer staples, and energy; financials, telecom, and materials were among the laggards.
• Last week, uncertainty affected multiple areas of the market. Domestically, the proposed House and Senate tax bills differed regarding when the 20-percent corporate tax cut should go into effect. The House bill called for the cut in 2018; the Senate bill pushed for the change in 2019.
• Federal Reserve (Fed) President William Dudley announced last week that he would step down in 2018. This marked yet another change at the Fed, which will already see the replacement of current Chair Janet Yellen and Vice Chair Stanley Fischer.
• Turning to international news, the governor of the People’s Bank of China issued a warning last week about the country’s “systemic financial risks,” citing concerns over the rising amounts of leverage in China’s economy.
• With just weeks to go before the U.K. was expected to reach a final financial agreement with the European Union over Brexit, U.K. Defense Minister Michael Fallon and U.K. Secretary of State for International Development Priti Patel were forced to resign.
• Last week was slow for economic news, as there was only one major data release. On Friday, the University of Michigan consumer sentiment survey declined slightly; however, this measure of consumer confidence remains near multi-year highs.

Source: Bloomberg

Source: Morningstar Direct

What to look forward to
After a slow week last week, we’ll have a busy one this week, with data releases covering the breadth of the economy.

On Wednesday, consumer price data will be released. The headline inflation index is expected to rise 0.1 percent for the month and 2 percent for the year. This is down from the previous month’s 0.5-percent monthly increase and reflects the fact that gasoline prices have normalized and refineries have reopened after the hurricanes. Core prices, which exclude energy and food, are expected to increase by 0.2 percent for the month, which is up from 0.1 percent the previous month. The annual change is expected to remain constant at 1.7 percent. If these numbers come in as expected, it would signal more of the same in slow price growth.

Also on Wednesday, retail sales growth is expected to tick down as the post-hurricane surge subsides. The headline number, including autos, is expected to drop from a 1.6-percent gain to a 0.1-percent gain. The core number, excluding autos, is also expected to drop, from a 1-percent gain to a 0.2-percent gain. There may be some downside here, as it’s hard to estimate the effects of the hurricanes on retail sales. If the numbers come in as expected, it would indicate a normalization of the trend.

Industrial production will be released on Thursday and is expected to fare better. The headline number is expected to rise to 0.4-percent growth from 0.3 percent, as the oil industry gets back to work. Manufacturing is expected to do even better, rising from 0.1-percent growth to 0.4-percent growth, as companies affected by the storms resume operations. If the numbers come in as expected, they would signal renewed growth in these sectors, and there may be some additional upside as well.

Finally, we’ll also get a look at the housing industry. On Thursday, the National Association of Home Builders survey is expected to stay at a strong 68, a six-month high. On Friday, housing starts are expected to rise from 1.127 million to 1.188 million. With building permits down, there is probably some downside risk here. Overall, if the numbers come in as expected, the housing industry looks stable, albeit possibly slowing a bit.

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.

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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.

© 2017 Commonwealth Financial Network®

Presented by Mark Gallagher

Treats, not tricks, for markets
October was another good month for the economy and markets. Better-than-expected economic data in the U.S., combined with positive corporate earnings news, lifted the major market indices. The S&P 500 Index returned a solid 2.33 percent. The Nasdaq Composite had an even more impressive 3.61-percent return, while the Dow Jones Industrial Average led the way with a gain of 4.44 percent.

This positive performance was driven by improving fundamentals. According to FactSet, as of October 27, the third-quarter blended earnings growth rate for the S&P 500 was 4.7 percent. This was up from the 4.2 percent projected at the end of September. The improvement can be attributed to positive surprises in the technology and energy sectors. Although the growth rate is down from last quarter—due to the effects of the hurricanes on the insurance sector—10 of 11 sectors reported higher sales and 6 reported higher earnings. Fundamentals ultimately drive long-term performance, so this accelerating growth rate is a good sign. On the technical side, all three U.S. indices remained well above their 200-day moving averages for the month.

International equity markets also did well in October. The MSCI EAFE Index, which represents developed markets, rose by 1.52 percent. European economies have strengthened, driving improving earnings. In addition, an announcement near month-end from the European Central Bank suggested stimulus would continue, buoying results even more. Emerging markets fared better than developed markets in October. The MSCI Emerging Markets Index returned 3.51 percent on continued commodity and export strength. Both indices also looked good technically, remaining above their trend lines for the month.

Unlike the equity markets, fixed income had a more challenging month, as a slight uptick in rates weighed on performance. The Bloomberg Barclays U.S. Aggregate Bond Index gained a mere 0.06 percent. High-yield bonds did better, with Bloomberg Barclays U.S. Corporate High Yield Bond Index notching a 0.42-percent gain. Spreads for high-yield bonds remained compressed. Given the low global interest rate environment, these tight spread levels may persist for some time.

Positive economic surprises
October brought more treats on the economic front. Most major data releases beat expectations, pointing to accelerating growth. The first estimate of third-quarter gross domestic product (GDP) growth came in at 3 percent, beating expectations for a more modest 2.5-percent increase. The improvement was driven in large part by increases in business investment and net export growth. Both of these factors have been weak in recent quarters, so the broader base of economic growth is a positive change.

Previously reported improvements in business confidence and spending continued into October. Durable goods orders, which often are used as a proxy for long-term business investment, increased by more than twice the expected amount. Even better, core durable goods orders, which exclude volatile aircraft purchases, also beat expectations for the month. This measure now sits at its second-highest level since the recession, as shown in Figure 1.

Businesses continued to show surprisingly high levels of optimism, despite the recent hurricanes. Following last month’s unexpected jump to a 13-year high, the Institute for Supply Management’s Manufacturing Index drew back slightly. It remains at a high level, however. Given the weakening of the dollar so far this year and current high confidence levels, manufacturing growth is likely to drive faster overall economic growth in the fourth quarter.

Consumers and housing also outperform
Businesses weren’t the only drivers of economic growth last month; consumers joined in as well. Consumer sentiment continued to rise in October, with both major surveys at or close to their highest levels since the dot-com boom. These high confidence levels were matched by actual spending growth. Retail sales were at very healthy levels last month, even before adding in the rise in auto sales as owners replaced cars destroyed in the hurricanes.

Housing was also a bright spot. Homebuilder confidence rebounded with a large jump during the month. This was likely driven by very strong levels of demand for new housing, as both existing and new home sales beat expectations. New home sales came in at an impressive 667,000 versus expectations for 554,000. Although low supply remains a concern, and materials and labor shortages continue to constrain the industry, strong demand is apparently keeping activity and confidence high. This bodes well for the future.

Political risks diminish but can still spook markets
Overall, the news was good this month. Both the domestic and global economies appear to be in good shape, exhibiting solid fundamentals and the possibility of accelerating growth. Risks remain, of course, and they are largely political. Major domestic policies such as tax reform and the pending debt-ceiling vote have the potential to destabilize markets. Policy risks also remain, as we will see a change in leadership at the Federal Reserve, even as it considers faster rate increases. These factors, combined with high market valuation levels, can certainly contribute to increased volatility here in the U.S.

International politics also carries risks. Notably, in Spain, the confrontation between secessionist Catalans and the Spanish government could affect European markets. In addition, the ongoing negotiations around the British exit from the European Union are potentially heating up.

Outside of Europe, political risks have receded compared with last month. In Japan, key U.S. ally Prime Minister Shinzo Abe won a snap election and gained more seats in the legislature. Combined with the successful passing of the Chinese party meeting, this suggests more stability in the region. The situation in North Korea appears to have moderated as well, despite the ongoing rhetoric. The risks are still there, but things are actually calmer than they have been in some time.

Fundamentals remain solid but volatility likely
With a growing economy and solid corporate fundamentals, we can reasonably expect more good news ahead. That said, the real risks—both known and unknown—remain. The markets are calmer than they have been in decades, but we need to understand and be prepared for the return of market volatility at some point in the future.

For now, though, the global economy continues to do well—and markets ultimately respond to growth. A well-diversified portfolio, designed to take advantage of that growth, and matched with an investor’s time horizon, continues to offer the best path to reaching financial goals over the long term.

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 Barclays U.S. 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 Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays 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.

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, senior vice president, chief investment officer, and Sam Millette, fixed income analyst, at Commonwealth Financial Network®.

© 2017 Commonwealth Financial Network®

Presented by Mark Gallagher

General market news
• The 10-year Treasury yield reached 2.45 percent twice last week before retreating on Friday and opening lower on Monday at 2.38 percent. Similarly, the 30-year Treasury was as high as 2.97 percent last week before pulling back on Friday and opening at 2.90 percent on Monday.
• The three major U.S. indices continued higher last week. The Nasdaq posted the largest gain of 1.09 percent, prompted by the earnings of Alphabet and Microsoft, which pushed the heavily tech-weighted Nasdaq higher. The Dow Jones Industrial Average posted a gain of 0.45 percent, followed by the S&P 500’s gain of 0.23 percent.
• President Mario Draghi of the European Central Bank (ECB) announced that the ECB would begin to taper its quantitative easing (QE) program in January. The taper will halve its QE bond buying from €60 billion per month to €30 billion per month until the end of September 2018. The ECB reaffirmed that rates would remain at current levels past the end of the QE program.
• In domestic news this week, the House of Representatives passed the Senate’s budget bill, making the passage of a tax reform package without Democratic support a possibility.
• U.S. technology led the gains last week, which was followed by consumer discretionary and materials. The lagging sectors were telecom, health care, and real estate. Health care was hit by a sales miss from Celgene and added pressure, as Donald Trump declared a public health emergency over the opioid crisis.
• The economic data released last week came in better than expected, as the economy remains healthy in the face of external pressures. On Wednesday, durable goods orders rose 2.2 percent against expectations of a modest 1-percent gain. The September growth helps assuage concerns around the potential effect of the hurricanes on business confidence.
• Also on Wednesday, new home sales outperformed by growing an eye-popping 18.9 percent in September. After a slowdown in August and expectations for a 1.1-percent decline, this increase was particularly notable.
• On Friday, the University of Michigan Consumer Sentiment Survey declined slightly, but consumer confidence remains very strong.
• Finally, the first estimate for third-quarter GDP also surprised to the upside, with 3-percent annualized growth. Given the negative effects of the storms and the uncertainty surrounding tax and health care reform during the quarter, this better-than-expected growth is certainly welcome.

Source: Bloomberg

Source: Morningstar Direct

What to look forward to
It will be a busy week on the data front, and we’ll get a wide-ranging look at the economy.

On Monday, personal income came in with 0.4-percent growth for September, up from 0.2 percent in August, which was expected. Personal spending was up by 1 percent, which was slightly above expectations of 0.9-percent growth and well above the August level of 0.1 percent. Both of these numbers were affected by the hurricanes, with spending particularly inflated as new autos replaced those destroyed by the storms and gasoline prices rose. These are solid numbers and suggest continued growth.

On Tuesday, the consumer confidence survey will be released and is expected to increase from 119.8 to 121. This remains at a very strong level historically, and the improvement would be due to lower gas prices from the post-hurricane spike and a strong job market. Strong consumer confidence is likely to keep spending growing, which would be a boon for the economy.

The regular meeting of the Federal Open Market Committee will conclude on Wednesday. There is hope for the possible announcement of President Trump’s selection for the next chair of the Federal Reserve, which would be big news.

Also on Wednesday, the Institute for Supply Management (ISM) Manufacturing Index is expected to pull back slightly from 60.8 to a very strong 59. Last month’s spike was largely due to technical adjustments after the hurricanes, so a small reduction was expected. Similar to the ISM Manufacturing Index, the ISM Non-Manufacturing Index is expected to decline slightly from 59.8 to 58 on Friday. Both of these indices indicate solid growth.

The international trade report, which will be released on Friday, is expected to pull back a bit, from a deficit of $42.4 billion in August to $43.5 billion in September. This is also due to hurricane effects, as petroleum exports were shut down during the storms. Preliminary data shows that the trend has reversed, so the pullback is of little concern, as export growth continues.

Finally, on Friday, the employment report is expected to show a major reversal of the hurricane-induced job loss seen last month. Job growth is expected to swing from a loss of 33,000 in September to a gain of 310,000 in October. Wage growth is expected to drop back from 0.5-percent growth to 0.2-percent growth, as overtime pay due to the storms drops out of the data. Other indicators are expected to remain steady, with unemployment at a very low 4.2 percent and the average workweek remaining at 34.4 hours. If the numbers come in as expected, this would be another strong report.

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.

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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.

© 2017 Commonwealth Financial Network®