Weekly Market Highlights

Volatility Continues To Grip Global Financial Markets

  • The European Central Bank is scheduled to publish the results of its comprehensive bank assessment on Sunday, October 26
  • 140 S&P 500 companies, representing 1/3 of the index market capitalization, will be reporting their financial results this week

Last Week’s Highlights

  • U.S. Retail Sales:  -0.3% in September.
  • U.S. Producer Price Index:  -0.1% in September month-over-month and +1.6% year-over-year (excluding food and energy, core PPI increased 0.2%).
  • U.S. Housing Starts:  +6.3% to SAAR of 1.017 million units in September.
  • U.S. Building Permits:  +1.5% to SAAR of 1.018 million units in September.
  • Oil:  $82.06 ($3.76)
  • Gold:  $1,239.00 (▲$17.30)
  • U.S. 10-year Treasury:  2.20% (0.11%)
  • Dollar:  Euro--$1.27, Yen--106.92 (weakened against Euro and Yen)
  • VIX:  21.99 (0.75)

What to Watch for

  • Tuesday 10/21:  U.S. Existing Home Sales
  • Wednesday 10/22:  U.S. Consumer Price Index
  • Friday 10/24:  U.S. New Home Sales
  • Sunday 10/26:  ECB Comprehensive Bank Assessment

It was another tumultuous week for global equity markets, however, the S&P 500, MSCI EAFE and MSCI Emerging Markets indices finished on a positive note on Friday—for the week, the indices posted losses of –1.0%, –0.6% and –1.3%, respectively.  Although equity markets experienced significant intraday movements, we believe last week’s outperformance of U.S. small cap equities and cyclical sectors such as Industrials and Materials bodes well for risk assets as a whole.  Challenges certainly remain and caution is warranted in the near term, but we continue to maintain a longer term constructive stance on equity markets—particularly in the U.S. and in several emerging markets (India and Indonesia for example) where reformists have won elections this year and are in the process of enacting meaningful change.

Searching for Clarity in Europe

WFrom a growth and policy standpoint, Europe continues to be a big question mark. Although the evolution of European monetary policy is still to be determined, the European Central Bank will publish the results of its comprehensive bank assessment, which will provide a financial health check of 130 banks in the euro area. So long as there are no big surprises, it could remove some uncertainty and enable the banking system to boost its lending to consumers and businesses. In the meantime, European inflation remains precariously low and peripheral bond markets (Greece in particular) have come under renewed pressure. As a result, we maintain our cautious near term view on Europe, even in the face of what we believe are attractive equity valuations.

Earnings to the Rescue?

In the United States, third quarter earnings season will take on a greater focus over the next few weeks. A third of the S&P 500 by index market capitalization will be reporting their financial results this week, including several large multinational corporations, which should give investors a better idea of how dollar strength is impacting earnings. While it is still early in the reporting schedule, earnings and revenues have exceeded estimates thus far and are forecasted to grow 6% and 4%, respectively. If headline risk quiets down (global growth concerns, Ebola, geopolitical), we believe another strong earnings quarter can bring some stability to equity markets in the United States and help drive asset prices higher over a longer investment time horizon.

Statistics on the Current State of the Market

S&P 500 Index -1.0% -4.3% 3.7%
Russell 1000 Index -0.7% -4.2% 3.4%
Russell 1000 Growth Index -0.7% -4.4% 3.2%
Russell 1000 Value Index -0.8% -4.1% 3.6%
Russell Midcap Index 0.4% -3.9% 2.7%
Russell 2000 Index 2.8% -1.7% -6.0%
DJ Industrial Average Index -1.0% -3.8% 0.6%
NASDAQ-100 Index -1.4% -5.8% 6.2%
MSCI EAFE Index -0.6% -5.9% -6.8%
MSCI Emerging Markets Index -1.3% -2.8% -0.1%
Alerian MLP Index 2.0% -6.3% 11.9%
Cash & Fixed Income      
Citigroup 10-Year Treasury Index 1.0% 2.8% 9.9%
Barclays US Aggregate Index 0.5% 1.5% 5.6%
Barclays Municipal Bond Index 0.4% 1.2% 8.9%
BofA Merrill Lynch U.S. High Yield Index 0.4% 0.1% 3.7%
Real & Alternative Assets      
FTSE EPRA/NAREIT North America Index 1.5% 3.7% 17.3%
FTSE EPRA/NAREIT Global Index 0.3% 0.4% 7.7%
Bloomberg Commodity Index -0.6% -1.1% -6.6%
Gold (NYM $/ozt) Continuous Future 0.7% 1.9% 1.1%
Crude Oil (NYM $/bbl) Continuous Future -3.5% -8.8% -13.3%

Data Source: FactSet and RIMES

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