Commentary (9/19/16) – Volatility Returns

September 19, 2016

After trading for nearly 50 days without a move of +/- 1%, the S&P 500 saw moves of greater than 1% four times in the past six days. Seasonality (August/September/October tend to be more volatile than other months) along with chatter from various Fed Governors contributed to the market volatility. Weak retail sales numbers (first decline in five months) combined with tepid industrial production numbers (-0.4% m/m) more-or-less cemented the feeling among investors that the Fed would remain on hold for their September meeting.

For the week, the DJIA finished higher by 0.25% while the broader-based S&P500 gained 0.59%. Interestingly, the S&P 500 is at roughly the same level that it reached in July 2015 (i.e., little overall movement in the S&P 500 average in over 14 months). International markets were weaker as the EAFE Index lost 2.48% for the week while emerging markets gave up 2.59%. Fixed income, represented by the Barclays Aggregate, finished the week slightly lower by 0.11%. As a result, the 10 YR US Treasury closed at a yield of 1.70% (up 3 bps from the previous week’s closing yield of 1.67%). Gold fell by $24.50 to close at $1,306.20/oz. Oil prices trended a bit lower on the week to close at $43.03/bbl … the International Energy Agency released their September report highlighting a slowdown in the growth of global demand (we see oil prices between $40 – $50 per barrel until at least year-end).

We expect volatility to remain high as investors digest conflicting economic and political news in the week ahead. All eyes will be on the Federal Reserve’s Wednesday meeting and rate announcement. We expect the Fed to remain on hold, but Fed comments will likely point to a December rate hike (of course, being data dependent). As always, we plan to look through the day-to-day news and focus on longer-term objectives.

How ‘bout those Sox!

Enjoy the last few days summer

“Don’t watch the clock; do what it does. Keep going.” – Sam Levenson