Market Update

• Stocks’ slide continues; oil pares gains. U.S. equities are following overseas markets lower this morning as traders focus on a slate of Federal Reserve Bank (Fed) speakers ahead of next week’s policy meeting and eye falling WTI crude oil prices, which are off more than 2%. Today’s weakness comes after major indexes saw modest declines on Thursday despite a 4.6% rally in crude, spurred by a surprise drawdown in inventories. The move stoked energy sector shares, which gained along with healthcare, REIT, and utilities stocks; though the other seven sectors declined. Overseas, European markets are mostly lower in midday trading with the STOXX Europe 50down 0.7%. Meanwhile, Asian indexes closed out the week on a mixed note: the Nikkei was flat, while the Shanghai Composite and Hang Seng indexes moved in opposite directions, down 0.6% and up 0.8%, respectively. Elsewhere, COMEX gold is lower, Treasury yields continue to rise, the yield on the 10-year note is at 1.66%, and the dollar is mixed.

Macro View

• What is the VIX saying? With the S&P 500 currently in the tightest 40-day range (using closing prices) ever at 1.54%, volatility has been muted. You can’t talk about volatility without mentioning the Volatility Index (VIX), so what is it saying now? Well, the VIX has been beneath its 50-day moving average for 49 straight days. Going back to 1990, this has only happened 16 other times. The big question is, what does this mean? Today on the LPL Research blog we dive into this question.
• Week ahead. Early in the week, focus will be on a trio of Fed speakers (Brainard, Lockhart, and Kashkari) ahead of the quiet period before the September 20-21 Federal Open Market Committee (FOMC) meeting. Fed policymakers and market participants will have plenty of U.S. data to digest next week, including the September readings on manufacturing in Philadelphia and New York, and August readings on small business sentiment, retail sales,Consumer Price Index (CPI), and industrial production. Overseas, the Bank of England meeting highlights a busy week, which includes the German ZEW index for September and post-Brexit readings on retail sales, industrial production, and employment in the U.K. EU leaders will meet late next week to discuss Brexit, and China will release August data on property prices, retail sales, fixed asset investment, and industrial production.
• Over the last month, the LPL Financial Current Conditions Index (CCI) was unchanged at 212. The CCIhas now rebounded well off of its January lows and remains in the range it has held for most of the current expansion. All 10 components of the CCI were relatively flat, with improvement in shipping traffic and credit spreads offset by a small increase in volatility and a rise in unemployment claims off of nearly 40-year lows. View the CCI.

Monitoring the Week Ahead

Friday

• European Union: Central Bankers and Finance Ministers Meeting in Bratislavia
• China: New Loan Growth and Money Supply (Aug)

Saturday

• European Union: Central Bankers and Finance Ministers Meeting in Bratislavia

Click Here for our detailed Weekly Economic Calendar

 

Important Disclosures

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better.

Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk.

Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.

High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors.

Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply.

Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.

Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

Technical Analysis is a methodology for evaluating securities based on statistics generated by market activity, such as past prices, volume and momentum, and is not intended to be used as the sole mechanism for trading decisions. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns and trends. Technical analysis carries inherent risk, chief amongst which is that past performance is not indicative of future results. Technical Analysis should be used in conjunction with Fundamental Analysis within the decision making process and shall include but not be limited to the following considerations: investment thesis, suitability, expected time horizon, and operational factors, such as trading costs are examples.

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