November 25th, 2015
The Markets
Despite the terrorist attacks in Paris and Mali, stocks climbed higher by the close of last week. Investors may have been influenced by favorable earnings reports from some large companies and the feeling that the impending Fed interest rate hike may be a sign the government believes the economy is on a definite upswing. The S&P 500 and the Dow saw significant gains, rising 3.27% and 3.35%, respectively. Nasdaq continues to be a consistent performer, closing last week up almost 8% year-to-date.
The price of gold (COMEX) decreased, selling at $1,077.30 by late Friday afternoon compared to $1,083.20 a week earlier. Crude oil (WTI) prices gained, selling at $41.46 per barrel by week’s end. The national average retail regular gasoline price decreased to $2.178 per gallon on November 16, 2015, $0.057 below the previous week’s price of $2.235 per gallon, and $0.716 below a year ago.
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|
Market/Index
|
2014 Close
|
Prior Week
|
As of 11/20
|
Weekly Change
|
YTD Change
|
DJIA
|
17823.07
|
17245.24
|
17823.81
|
3.35%
|
0.00%
|
Nasdaq
|
4736.05
|
4927.88
|
5104.92
|
3.59%
|
7.79%
|
S&P 500
|
2058.90
|
2023.04
|
2089.17
|
3.27%
|
1.47%
|
Russell 2000
|
1204.70
|
1146.55
|
1175.15
|
2.49%
|
-2.45%
|
Global Dow
|
2501.66
|
2358.29
|
2418.66
|
2.56%
|
-3.32%
|
Fed. Funds
|
0.25%
|
0.25%
|
0.25%
|
0%
|
0%
|
10-year Treasuries
|
2.17%
|
2.26%
|
2.26%
|
0 bps
|
9 bps
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Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark
performance of specific investments.
Last Week’s Headlines
· The Consumer Price Index (CPI) experienced a modest monthly gain in October, increasing 0.2%. This follows two consecutive months of decline. According to the Bureau of Labor Statistics report, the index has increased 0.2% over the last 12 months. The core CPI, less the volatile food and energy segment, sits at 1.9%–right at the Fed’s general 2% inflation target. Stronger inflationary trends could be a sign
of economic strength sufficient enough to absorb an interest rate hike.
· The Federal Reserve puts out a monthly index of industrial production covering manufacturing, mining, and electric and gas utilities. The latest figures show that industrial production fell once again, declining 0.2% in October. Indexes for utilities (-2.5%) and mining (-1.5%) decreased, while the index for manufacturing actually moved up 0.4% for the month. Also on the plus side, at 107.2% of its 2012 average, total industrial production in October was 0.3% above its year-earlier level.
· The Housing Market Index, which is based on a survey of National Association of Home Builders members, seeks to rate the single-family housing market. The preliminary report for November shows the index dipped to 62 compared to October’s revised reading of 65. A reading over 50 denotes general builder confidence. While enthusiasm in the market for single-family home sales may have softened a bit, November’s preliminary reading reveals continuing optimism in the market.
· Housing starts–marked by the actual start of new residential construction–fell 11% in October compared to September’s revised figures. According to the latest Census Bureau report, there were about 1,060,000 housing starts in October–131,000 fewer than the prior month’s total. Builders cut back on construction of apartments and condominiums to the tune of 25.1%, while starts of single-family residences fell 2.4%. On the other hand, builders showed confidence in future residential sales, as applications for building permits rose 4.1%.
· In the week ended November 14, there were 271,000 initial claims for unemployment insurance, a decrease of 5,000 from the prior week. The advance seasonally adjusted insured unemployment rate was unchanged at 1.6% for the week ended November 7, while the advance number for continuing unemployment insurance claims was 2,175,000, a decrease of 2,000 from the previous week’s revised level.
Eye on the Week Ahead
Several important economic indicators are highlighted in reports during the week of November 23. Reports on existing home sales and new home sales may reveal the direction of the housing market heading to the end of the year. Imports and exports have generally been lagging for much of this year, and the latest figures are expected to reveal more of the same. The report on gross domestic product is the final take on overall economic activity available to the FOMC before its December meeting.
Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy
Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The
Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.
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Posted in Westside Investment Weekly Update | No Comments »
November 11th, 2015
The Markets
Following a very favorable jobs report at the end of last week, the domestic indexes listed here posted overall gains as of last Friday’s close. The Russell 2000, which had been lagging a bit, saw the largest increase, gaining 3.26%, followed by the Nasdaq, which rose over 93 points. Only the Global Dow regressed by week’s end, but only by 0.11%. Also of note is the sharp increase in the 10-year Treasuries yield–up 18 basis points, as money moved out of bonds, possibly in anticipation of higher interest rates on the horizon.
The price of gold (COMEX) decreased, selling at $1,088.90 by late Friday afternoon compared to $1,141.70 a week earlier. Crude oil (WTI) prices fell, selling at $44.52 per barrel by week’s end. The national average retail regular gasoline price decreased to $2.224 per gallon on November 2, 2015, $0.004 under the previous week’s price of $2.228 per gallon, and $0.769 below a year ago.
|
|
Market/Index
|
2014 Close
|
Prior Week
|
As of 11/6
|
Weekly Change
|
YTD Change
|
DJIA
|
17823.07
|
17663.54
|
17910.33
|
1.40%
|
0.49%
|
Nasdaq
|
4736.05
|
5053.75
|
5147.12
|
1.85%
|
8.68%
|
S&P 500
|
2058.90
|
2079.36
|
2099.20
|
0.95%
|
1.96%
|
Russell 2000
|
1204.70
|
1161.86
|
1199.75
|
3.26%
|
-0.41%
|
Global Dow
|
2501.66
|
2436.23
|
2433.65
|
-0.11%
|
-2.72%
|
Fed. Funds
|
0.25%
|
0.25%
|
0.25%
|
0%
|
0%
|
10-year Treasuries
|
2.17%
|
2.14%
|
2.32%
|
18 bps
|
15 bps
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Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Last Week’s Headlines
· For those at the Fed looking to raise interest rates in December, last week’s employment report will certainly support that move. The Bureau of Labor Statistics reported that nonfarm employment increased by 271,000 in October, while the unemployment rate (5.0%) and did the number of unemployed persons (7.9 million) remained steady. In October, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents to $25.20, following little change in September. Hourly earnings have risen by 2.5% over the year.
· The trade deficit for goods and services narrowed in September compared to August, according to the latest figures from the Bureau of Economic Analysis. The trade deficit was $40.8 billion in September, down $7.2 billion from $48.0 billion in August–the smallest deficit since February. September exports were $187.9 billion, $3.0 billion more than exports in August. September imports were $228.7 billion, $4.2 billion less than August imports. The September decrease in the goods and services deficit reflected a decrease in the goods deficit of $7.3 billion to $60.3 billion and a decrease in the services surplus of $0.1 billion to $19.5 billion.
· According to the Institute for Supply Management Report on Business®, the October Purchasing Managers’ Index (PMI®) registered 50.1%, a decrease of 0.1% from the September reading of 50.2%. October’s reading marks the third consecutive month of decline in the manufacturing sector. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting. The report also includes information on a number of sub-indexes, which provide some insight into manufacturing activity. For instance, the New Orders Index, the Production Index, and the Prices Index each increased in October compared to September. Yet, the Employment Index and the Imports Index both regressed. Survey respondents expressed concerns over the high price of the dollar and the continuing low price of oil.
· In contrast to the PMI®, the ISM Non-Manufacturing Index (NMI®) has been posting positive data indicating growth. October’s report maintained that trend as the NMI® came in at 59.1%–2.2% ahead of September’s reading. The reading for October represents growth in the non-manufacturing sector, but at a faster pace, since readings over 50% represent some growth. According to the report, the Non-Manufacturing Business Activity Index increased 2.8%; the New Orders Index gained 5.3%; the Employment Index rose 0.9%; and the Prices Index increased 0.7%–an indication that prices decreased in October.
· The U.S. Census Bureau of the Department of Commerce reported last week that construction spending during September 2015 was estimated at a seasonally adjusted annual rate of $1,094.2 billion, 0.6% above the revised August estimate of $1,087.5 billion. The September figure is 14.1% above the September 2014 estimate of $959.2 billion. Spending on private construction was at a seasonally adjusted annual rate of $794.2 billion, 0.6% above the revised August estimate of $789.7 billion. In September, the estimated seasonally adjusted annual rate of public construction spending was $300.0 billion, 0.7% above the revised August estimate of $297.8 billion.
· Nonfarm business sector labor productivity increased at a 1.6% annual rate during the third quarter of 2015, the U.S. Bureau of Labor Statistics reported last week, as output increased 1.2% and hours worked decreased 0.5%–the first decline in hours worked since 2009. From the third quarter of 2014 to the third quarter of 2015, productivity increased 0.4%, reflecting increases in output and hours worked of 2.3% and 1.9%, respectively.
· Continuing a somewhat disturbing trend, new orders for manufactured goods, down in July and August, decreased $4.7 billion, or 1.0%, to $466.3 billion in September, the U.S. Census Bureau reported last week. Shipments, unfilled orders, and inventories each decreased in September from August. The decline in factory orders can be traced, at least in part, to weakness in exports, low oil prices, and a soft energy sector.
· Initial claims for unemployment insurance increased by 16,000 for the week ended October 31, to close at 276,000, up from the previous week’s unrevised level of 260,000. The advance seasonally adjusted insured unemployment rate was unchanged at 1.6% for the week ended October 24, while the advance number for continuing unemployment insurance claims increased 17,000 to 2,163,000.
Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.
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Posted in Trade of the week | No Comments »
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Market volatility: Like most things in life, it’s all relative
November 25th, 2015The stock market has certainly seen some increased volatility over the past year, with the past few months being an especially turbulent period. We believe, however, that the recent volatility spike feels more drastic than it really is, and this can be explained by the relative stability we’ve experienced over the past few years.
2015: Not as wild a ride as it seems
The illustration below compares the performance of the S&P 500 [the black bars] for each year going back to 1980, and below it the largest intra-year decline [the red dots][1] during that year.

Putting it all into context
Dr. Ken Waltzer, MD, MPH, AIF®, CFA, CFP®
Managing Director, KCS Wealth Advisory
Laura Gilman, CFP®, PFP, MBA
Managing Director, KCS Wealth Advisory
Adam Bragman, CFA
Director of Investment Research, KCS Wealth Advisory
Posted in Market Commentary | No Comments »