Market Update: Wednesday, September 14, 2016

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  • Stocks and oil ponder direction. Major U.S. indexes opened slightly higher this morning after yesterday’s sell-off, which was triggered in part by a 3% drop in WTI crude oil. As a result, energy shares (-2.9%) led the S&P 500 decline, while technology (-0.6%) showed relative strength. Overseas, both the Shanghai Composite and Nikkei Index lost 0.7%; the Bank of Japan meets next week, and is expected to take steps to steepen its yield curve. European shares have rebounded modestly in afternoon trade as markets digest mixed Eurozone July industrial production and several Consumer Price Index (CPI) country reports. Meanwhile, oil ($44.40/barrel) is trading lower despite a surprise drop in inventory builds, COMEX gold ($1327/oz.) continues to trade in a tight range, and the yield on the 10-year note has slipped 0.04% from yesterday’s close at 1.73%.

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  • The volatility continues. The S&P 500 fell another 1.5% yesterday, on the heels of a 1.5% jump on Monday and the 2.5% drop on Friday. Remember, the S&P 500 went 43 straight days without a 1% move (up or down), now it is working on three straight. The last time it moved 1% for three straight days was a six consecutive day streak at the end of June. The all-time record was an incredible 23 straight days in 1931. What also is interesting about the recent three days is the 1% moves have alternated. The last time four consecutive days alternated between 1% moves was late January 2016 and October 2011 before that. It hasn’t made it to five straight for more than 80 years.
  • Get ready for some September volatility? As has been well documented, September is historically the weakest month going back to 1950, at -0.5% on average and lower 56% of the time. Here’s what is interesting about this, the first half of September tends to be strong, while the second half is weak. This has been more pronounced recently, as over the past 20 years, September has actually been up +1.6% on average as of the 16th of the month, but then steadily moves lower the remainder of the month. Also, the next five weeks tend to see more big daily moves than any other time of the year. Today on the LPL Research blog we will take a closer look at this phenomenon.

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Wednesday

  • UK: Jobless Claims (Aug)
  • European Commission President Jean Claude Juncker Delivers “State of the Union” Address

Thursday

Friday

  • Household Net Worth/Flow of Funds (Q2)
  • EU Leaders Summit Meeting
  • Russia: Central Bank Meeting (Rate Cut Expected)

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.

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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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