Presented by Mark Gallagher
General market news
• Equity markets rose higher last week for the most part, thanks to a late-week surge on Friday. The Russell 2000 was the only index to post negative returns, with small-cap stocks coming under some pressure after Janet Yellen suggested that valuations are stretched in the asset class.
• With few economic releases slated for the coming week, equity markets will be paying particular attention to second-quarter earnings results, as reporting volume picks up dramatically over the next several weeks.
• Treasury bonds rallied on the heels of the Malaysian airliner crash last week. We expect news on this story, the related conflict in Ukraine, and violence in the Middle East to continue to affect markets in the short term.
• Municipal bonds performed well during the first half of the year, led by longer-dated bonds. We have, however, seen some selling of late, mainly focused in Puerto Rican debt or products that own PR bonds. We expect the market to closely follow Treasuries.
Equity Index
Week-to-Date % Month-to-Date % Year-to-Date % 12-Month %
S&P 500
0.54% 0.99% 8.19% 19.52%
Nasdaq Composite
0.38% 0.58% 6.81% 24.32%
DJIA
0.97% 1.75% 4.47% 12.58%
MSCI EAFE
0.52% −0.80% 4.40% 16.76%
MSCI Emerging Markets
0.61% 1.65% 7.89% 14.19%
Russell 2000
−0.73% −3.45% −0.37% 11.07%
Source: Bloomberg
Fixed Income Index
Month-to-Date % Year-to-Date % 12-Month %
U.S. Broad Market
0.03% 4.14% 4.32%
U.S. Treasury
0.09% 3.30% 2.50%
U.S. Mortgages
−0.21% 3.83% 4.64%
Municipal Bond
−0.00% 6.59% 6.91%
Source: Bloomberg
What to look forward to
The most important data to watch for next week revolves around inflation and housing. Consumer Price Index numbers are expected to come in slightly above 2 percent on a year-over-year basis. An unexpected increase above this level could move interest rates.
We will also see data on both Existing and New Home Sales, giving us further insight into the health of the housing market.
Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Barclays Capital Mortgage-Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Barclays Capital Municipal Bond Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. The Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index measures the performance of intermediate (1- to 10-year) U.S. TIPS.
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Mark Gallagher is a financial advisor located at 2586 East 7th Avenue #304. 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 651-774-5427 or at mark@markgallagher.com.
Authored by the Investment Research team at Commonwealth Financial Network.
© 2014 Commonwealth Financial Network®