Presented by Mark Gallagher
General market news
• Treasury yields opened the week in the middle of last week’s range. The 10-year started Monday morning at 2.32 percent, after going as low as 2.28 percent and as high as 2.36 percent last week.
• Amid concerns over a global slowdown, with China lowering interest rates and continued central bank support in Europe and Japan, the demand for Treasuries could keep rates low for some time, even as the U.S. economy slowly improves.
• Equity markets continued their move upward, setting all-time highs on the Dow Jones Industrial Average and the S&P 500 Index. After performing poorly last week in the face of lower oil prices, the energy sector rebounded, becoming a major source of strength for the markets.
• With third-quarter earnings season in the rearview mirror, the market may begin to move more in tandem with geopolitical and economic headlines than with fundamentals. Last week, for example, the People’s Bank of China announced surprise interest rate cuts, and the European Central Bank revealed that it would step up its efforts to increase inflation, both of which helped push markets higher. This market environment may lead to heightened volatility going forward.
| Equity Index | Week-to-Date % | Month-to-Date % | Year-to-Date % | 12-Month % |
| S&P 500 | 1.21% | 2.45% | 13.70% | 17.28% |
| Nasdaq Composite | 0.58% | 1.94% | 14.12% | 20.21% |
| DJIA | 1.06% | 2.69% | 9.73% | 13.88% |
| MSCI EAFE | 0.16% | 0.05% | −2.14% | 0.56% |
| MSCI Emerging Markets | −0.06% | −2.51% | 1.17% | 1.29% |
| Russell 2000 | −0.10% | −0.01% | 1.88% | 6.09% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date % | Year-to-Date % | 12-Month % |
| U.S. Broad Market | 0.17% | 5.57% | 5.10% |
| U.S. Treasury | 0.25% | 5.05% | 4.22% |
| U.S. Mortgages | 0.36% | 5.59% | 4.88% |
| Municipal Bond | −0.14% | 8.85% | 8.75% |
Source: Bloomberg
What to look forward to
This week will present several important economic releases. Preliminary third-quarter Gross Domestic Product data, expected to come in at 3.3 percent, will be released Tuesday, along with the S&P/Case-Shiller Home Price Index.
Most releases will come on Wednesday, before the holiday, including figures on Durable Goods Orders, which are expected to show some improvement; Personal Income and Outlays, which are expected to increase; and New Home Sales.
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 Gallagher Financial Services at 2586 East 7th Avenue, 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.
© 2014 Commonwealth Financial Network®