Market Update: Wednesday, July 13, 2016


  • Stocks near flat after posting another record high; oil under pressure. U.S. stocks are little changed in early trading, while a larger than expected build in inventories has WTI crude oil moving lower by about 1%. Yesterday’s session saw the Dow join the S&P 500 at all-time highs as both indexes gained approximately 0.7%. The move up was led by energy and materials stocks, while the high-yielding utilities, telecom, and consumer staples sectors all closed lower, as the yield on the 10-year Treasury note moved up 7 basis points to 1.51%. Asian indexes were up modestly overnight, though the Nikkei moved off its opening highs after a government spokesman dismissed the idea of “helicopter money”; in Europe, stocks are moving higher, led by Spain’s IBEX, up 0.9%. Elsewhere, COMEX gold is moving higher, the U.S. Dollar Index continues to consolidate near 96, and Treasuries are moving modestly higher, pushing yields down, following the selling pressure seen in the first two days of the week.


  • More new highs. The S&P 500 closed at a new all-time high for the second consecutive day, the Dow closed at a new high for the first time since May 2015, and the Nasdaq closed over 5,000 for the first time since December 31, 2015. To put this milestone in perspective, the Nasdaq closed above 5,000 twice in 2000, 116 times last year, and once so far this year. What stood out about yesterday’s action was the more aggressive groups led. Energy, materials, industrials, and financials led; utilities and consumer staples lagged. Additionally, small caps and mid caps did better than their large cap brothers. Much of this year has been marked by the more defensive areas leading, and over the past week we’ve seen this changing.
  • Big 10-day rally. The S&P 500 is up 7.6% the past 10 days, for the best 10-day rally since December 2011. This big rally comes on the heels of the 5.3% drop that took place two days after the Brexit vote. What is interesting about this is looking at the other times the S&P 500 was up 7.5% or more in 10 days, the near-term strength continues. October 2011 and December 2011 were the last two times this happened and the S&P 500 was up 2.2% and 3.0%, respectively, a month later. Going back to 2000, this has happened 18 other times and the median return a month later is 1.8% and higher 13 times.
  • Germany issues bonds with 0% coupon. The German government issued a 10-year bond this morning with a 0% coupon and negative yield. Investors are willing to pay the German government to hold their money and repay them 10 years later. This shows a lack of confidence in other governments and in the banking system. Low yields on European bonds also increase demand for U.S. Treasuries and make the U.S. highly attractive on a relative basis.



  • Beige Book
  • Kaplan (Hawk)
  • Canada: Bank of Canada Meeting (No Change Expected)
  • China: Imports and Exports (Jun)


  • Initial Claims (7/9)
  • UK: Bank of England Meeting (Rate Cut Expected)
  • China: GDP (Q2)


  • Retail Sales (Jun)
  • CPI (Jun)
  • Empire State Mfg. Index (Jul)
  • Consumer Sentiment and Inflation Expectations (Jul)


  • China: Property Prices (Jun)

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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) 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.

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