Market Update: Friday, May 20, 2016


  • Markets looking to end week on positive note. U.S. stocks are moving higher in early trade, following gains in Asia overnight and strength in European markets. Despite the hawkish tone Federal Reserve Bank (Fed) minutes struck earlier in the week, markets will have the chance to finish the week higher; yesterday’s session saw the major averages fall, led by the heavily weighted financial sector, which gave up some of Wednesday’s strong gains. The yield on the 10-year note also dropped, but is moving higher again this morning. WTI crude oil, COMEX gold, and the dollar are all relatively unchanged, following similar sessions yesterday.


  • Down four in a row, but not out. The S&P 500 is slightly lower for the week, which would mark four consecutive weekly declines for the first time since October 2014. The good news is the S&P 500 is down only 2.5% for the past four weeks, making that one of the smallest losses during a four-week losing streak in 22 years.
  • A year since new highs. One year ago tomorrow the S&P 500 closed at 2130.82, which was also the last time it closed at an all-time high. Going back to 1955, there were 12 other times the S&P 500 went a full calendar year without a new high. Today on the LPL Research blog we will take a closer look at this development.
  • Week ahead. Fed Chair Janet Yellen and Greg Mankiw, who headed up the Council of Economic Advisors under President Bush, will hold a panel discussion at Harvard on May 27. Former Fed Chair Bernanke will also join the discussion. On the data front, reports on home sales, durable goods imports and exports for April, and the manufacturing Purchasing Managers’ Index (PMI) for May will draw most of the attention. Aside from Yellen, there are more than half a dozen Federal Open Market Committee (FOMC) members on the docket next week. Overseas, the manufacturing PMI for May in Japan and the Eurozone will get plenty of attention early in the week; and later in the week, the May Ifo and ZEW data in Germany will be the focus. The G7 Leaders Summit in Japan is next Thursday and Friday, May 26 and 27.



  • Existing Home Sales (Apr)


  • Japan: Imports and Exports (Apr)

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.

Investing in MLPs involves additional risks as compared with the risks of investing in common stock, including risks related to cash flow, dilution, and voting rights. MLPs may trade less frequently than larger companies due to their smaller capitalizations, which may result in erratic price movement or difficulty in buying or selling. MLPs are subject to significant regulation and may be adversely affected by changes in the regulatory environment, including the risk that an MLP could lose its tax status as a partnership. Additional management fees and other expenses are associated with investing in MLP funds.

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.This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor

Tracking # 1-499704