Market Commentary, 09/14/16
Today the Dow closed down to 18,034.77 resulting in a YTD return of 3.5%; likewise the S&P 500 closed down to 2,125.77 for a gain of 4.0% YTD. Last week stocks suffered their largest weekly decline since the start of the year as both indices have fallen about 3% from the August 15th high.
In US economic news, the number of applications for unemployment benefits fell by 4,000 last week to 259,000 – remaining near the lowest level since the early 1970’s. Normally that would be positive; however, the market has entered a “Goldilocks” period – meaning analysts want numbers to be positive, but not so positive that Fed Chairperson Yellen raises interest rates.
In fact, these figures and other economic data spurred Eric Rosengren, the Boston Fed President, to say that “there is a reasonable case for a gradual rise” of interest rates and to indicate that the US economy could overheat if the Fed doesn’t raise rates soon. His comments on Friday sent the market downward on fears of a potential rate increase.
While the market was down slightly today, the prior three days saw moves of over 1%. This increased volatility is likely to continue through the September 21 Fed Meeting, all the way to the November election. A look at the last several dozen election cycles shows a slowing down of the market and a nearly paralyzed industry, especially in the final year of an eight-year president. According to Merrill Lynch Global Research, the S&P 500 has dropped an average of 2.8% since 1928 during election years where the incumbent is not seeking re-election (1). This uncertainty will likely be multiplied as the current election is one of the most polarizing in recent history.
We are monitoring key economic events, including jobless claims and retail sales both reporting on September 15. As we have mentioned, volatility is a major concern and we will continue to invest accordingly.
Jeremiah Patterson, CFP®
Copelin Financial Advisors
514 Brooks Street
Sugar Land, TX 77478
Phone: 281 240-2902
Fax: 281 240-2856
Securities offered through ProEquities, Inc., a Registered Broker-Dealer and Member FINRA & SIPC Advisory Services offered through Harvest Investment Services, LLC., a Registered Investment Advisor Copelin Financial Advisors, Inc and Harvest Investment Services, LLC are independent of ProEquities, Inc.
(1)”How Presidential Elections Affect the Markets.” www.ml.com. Merrill Lynch