Presented by Mark Gallagher
General market news
• The 10-year Treasury yield climbed as high as 2.39 percent on Friday before closing below 2.30 percent; it opened early Monday morning as low as 2.27 percent. Last week’s employment report, though positive, came in below expectations, and with global government yields so low (much lower than U.S. yields), investors continued moving assets to Treasuries.
• Despite the sell-off we’ve seen in Treasuries over the last couple of weeks, they remain the best-performing government debt over the last month, as yields on the 10-year moved from north of 2.50 percent to as low as 1.86 percent and now back to 2.27 percent. Money should continue to pour into Treasuries as global investors seek yield on safety assets, with the German 10-year bund yielding 0.804 percent.
• Equities continued to drift higher last week. Large-cap stocks performed well, with the S&P 500 Index and the Dow Jones Industrial Average both closing at record highs, returning 0.77 percent and 1.17 percent, respectively. Small-caps lagged larger-cap indices, as the Russell 2000 Index returned 0.01 percent after strong performance the week before. Internationally, both developed and emerging markets performed poorly, with the MSCI EAFE and MSCI Emerging Markets indices returning −0.64 percent and −2.42 percent, respectively.
• The move higher in U.S. equities was, in part, the result of October’s modest increase in jobs and a decline in the unemployment rate. Renewed worries over slow global growth, as well as increased regulatory scrutiny for banks in the eurozone, contributed to poor international performance.
| Equity Index | Week-to-Date % | Month-to-Date % | Year-to-Date % | 12-Month % |
| S&P 500 | 0.77% | 0.77% | 11.85% | 18.69% |
| Nasdaq Composite | 0.12% | 0.12% | 12.08% | 21.62% |
| DJIA | 1.17% | 1.17% | 8.10% | 15.34% |
| MSCI EAFE | −0.64% | −0.64% | −2.82% | 0.62% |
| MSCI Emerging Markets | −2.42% | −2.42% | 1.26% | 0.84% |
| Russell 2000 | 0.01% | 0.01% | 1.91% | 10.16% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date % | Year-to-Date % | 12-Month % |
| U.S. Broad Market | 0.07% | 5.46% | 4.59% |
| U.S. Treasury | 0.14% | 4.93% | 3.62% |
| U.S. Mortgages | 0.07% | 5.28% | 4.26% |
| Municipal Bond | −0.27% | 8.70% | 8.23% |
Source: Bloomberg
What to look forward to
In a light week for economic news, we will see data on Retail Sales, which are expected to improve after a dip in the last reading, and the University of Michigan Consumer Sentiment survey.
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.
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®