Market Update: Monday, March 28, 2016


  • Stocks little changed to end short week. Indexes rallied from opening lows to finish mostly flat on Thursday, ending the market’s five-week winning streak. Telecom was the best performing sector on the day, closing up 1%, while financial stocks weighed on the indexes. Commodities declined slightly as WTI crude oil moved down 0.8% to $39.49/barrel and COMEX gold inched down 0.2% to close at $1221.70/oz. Lastly, the 10-year Treasury yield advanced 0.02% to 1.90%. Final tallies: Dow +13.14 to 17515.73, Nasdaq +4.64 to 4773.50, S&P 500 -0.77 (-0.04%) to 2035.94.
  • Cautious start to week with economic data, Fed in focus. U.S. indexes are near flat as traders await today’s inflation data, which could be influential in the Federal Reserve’s Bank (Fed) near-term rate policy decision; though speeches tomorrow from several Fed policymakers, including Chair Janet Yellen, as well as Friday’s Employment Situation report will also be closely watched. Overseas, European markets are closed for the Easter Monday holiday; Asian equities were red across the board, with the exception of Japan’s Nikkei Index, which rose 0.8% on the heels of yen strength. Gold recovered most of its early losses after touching one-month lows, oil is moving lower, and 10-year Treasury yields are flat.


  • The win streak is over. The S&P 500 closed lower last week for the first time after five consecutive higher weeks. Nonetheless, a loss of only 0.7% for the shortened week, after gaining 9.9% in the previous five weeks, helps to put things in perspective. With three days to go until March is over, the S&P 500 is still higher by 5.4% for the month, after being down the previous three months. Additionally, for the quarter the S&P 500 is down 0.4%. Considering it was down by 10.5% at the February lows, this quarter is shaping up to be one of the largest quarterly reversals since the Great Depression.
  • Sentiment has improved, but how much? We noted in mid-February how many sentiment indicators were flashing levels of fear seen at past major lows. Since then, the S&P 500 has seen a five-week win streak, and with it, improvement on the sentiment front. However, looking at the American Association of Individual Investors (AAII) sentiment survey shows the percentage of bulls has been beneath the long-term average of 38.6% for 20 consecutive weeks. In other words, even after the impressive rally since mid-February, the bulls aren’t even yet back to what has been the normal level going back nearly 30 years.
  • We present our stock market “Final Four.” North Carolina, Oklahoma, Syracuse, and Villanova are headed to Houston to determine this year’s college hoops national champion. In that spirit, in this week’s Weekly Market Commentary (due out later today) we share our own Final Four for the stock market: China, earnings, the Fed, and oil. Stock market investors may not storm the court at the end of this year, and there will likely be comebacks and upsets along the way, but we continue to expect mid-single-digit* total returns for the S&P 500 in 2016.
  • A speech by Fed Chair Yellen along with key March data on jobs, consumer spending, and manufacturing highlight the week’s busy economic calendar. In the lull between the major central bank meetings of early to mid-March and the start of Q1 earnings reporting season in mid-April, markets will be assessing the health and trajectory of the U.S. and global economies. Fed Chair Yellen’s speech and Q&A session on Tuesday, March 29, is a late addition to the calendar and joins Friday’s Employment Situation report for March as the key events of the week. Data due out on the Institute for Supply Management (ISM) manufacturing index and vehicle sales for March, in addition to data on pending home sales, home prices, exports and imports, and construction spending in February will help to solidify Q1 gross domestic product (GDP) estimates. Overseas, it’s a quiet week for central banks, China will release its March manufacturing data, Japan will release the crucial Tankan Survey for March, and data in the Eurozone and U.K. on bank lending and money supply will be closely watched.

*Historically since WWII, the average annual gain on stocks has been 7 – 9%. Thus, our forecast is in-line with average stock market growth. We forecast a mid-single digit gain, including dividends, for U.S. stocks in 2016 as measured by the S&P 500. This gain is derived from earnings per share (EPS) for S&P 500 companies assuming mid-to-high-single-digit earnings gains, and a largely stable price-to-earnings ratio. Earnings gains are supported by our expectation of improved global economic growth and stable profit margins in 2016.




  • Yellen (Dove)
  • Eurozone: Money Supply and Bank Lending (Feb)


  • ADP Employment (Mar)
  • Germany: CPI (Mar)


  • Challenger Job Cut Announcements (Mar)
  • Dudley (Dove)
  • Germany: Unemployment Change (Feb)
  • UK: Money Supply and Bank Lending (Feb)
  • China: Official Mfg. PMI (Mar)
  • China: Caixin Mfg. PMI (Mar)
  • Japan: Tankan Survey (Mar)


  • Employment Report (Mar)
  • ISM Mfg. (Mar)
  • Consumer Sentiment and Inflation Expectations (Mar)
  • Vehicle Sales (Mar)
  • Mester (Hawk)
  • Germany: Retail Sales (Feb)
  • Japan: Vehicle Sales (Mar)


Click Here for our detailed Weekly Economic Calendar


Important Disclosures

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) help eliminate inflation risk to your portfolio, as the principal is adjusted semiannually for inflation based on the Consumer Price Index (CPI)—while providing a real rate of return guaranteed by the U.S. government. However, a few things you need to be aware of is that the CPI might not accurately match the general inflation rate; so the principal balance on TIPS may not keep pace with the actual rate of inflation. The real interest yields on TIPS may rise, especially if there is a sharp spike in interest rates. If so, the rate of return on TIPS could lag behind other types of inflation-protected securities, like floating rate notes and T-bills. TIPs do not pay the inflation-adjusted balance until maturity, and the accrued principal on TIPS could decline, if there is deflation.

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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