Market Update: Monday, September 26, 2016

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  • U.S., global markets stumble to begin week. U.S. stocks are down in early trading despite relatively little news. Last week saw the S&P 500 move up by 1.2%, despite a more than half a percent drop on Friday. Though all sectors finished higher on the week, there was notable outperformance from the utilities and telecom sectors as Treasury yields fell sharply; the yield on the 10-year note moved from 1.70% to 1.62% for the week. Overnight in Asia, the Shanghai Composite and Hang Seng both fell by more than 1%, as did Japan’s Nikkei (-1.3%) as investors shrugged off accommodative comments from the Bank of Japan’s Governor. The banking sector continues to weigh on overall sentiment in Europe, where major indexes are also broadly lower. Finally, the 10-year note is continuing to rise with yields near 1.60%, WTI crude oil is back above $45/barrel, and COMEX gold is modestly higher at $1346/oz.

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  • LEI still points to modest growth. In this week’s Weekly Economic Commentary, we’ll take another look at the signal coming from the Leading Economic Index (LEI). The LEI rose 1.1% year over year in August, suggesting that the odds of a recession in the coming year remain low.
  • Our Five Forecasters are collectively sending mostly mid-cycle signals. The LEI, yield curve, and market breadth are all signaling the continuation of the economic expansion and bull market. Stock market valuations and the ISM Manufacturing Index are flashing some warning signs that are worth watching. We discuss these indicators in this week’s Weekly Market Commentary, which suggest that the now seven-and-a-half year old bull market is poised to continue.
  • Week ahead: a baker’s dozen. The week ahead includes 13 appearances from Federal Reserve Bank (Fed) officials as the market gauges the odds of a December rate hike now that the September meeting is over. On the data front, reports on home prices and home sales, durable goods orders and shipments, along with inflation and inflation expectations for August and September are on the docket. While it’s a relatively quiet week for overseas central banks, September Purchasing Managers’ Indexes (PMI) in China, along with Japan’s full slate of data for August, will keep traders busy. Early in the week, all the attention will be on the first presidential debate between Hillary Clinton and Donald Trump on Monday, September 26.
  • Record-setting audience poised for debate. A tightening race, based on the latest polls, has upped the stakes for tonight’s first of three presidential debates, which will likely draw a record audience. We discussed some of the potential implications of a Trump victory in our latest blog, where a closer race may contribute to higher stock market volatility in the near term. Some of the key policy issues undecided voters will be focused on tonight include trade, immigration/foreign policy, tax reform, and approach to regulation, while trustworthiness and fitness for office will continue to garner headlines.

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Monday

  • Dallas Fed Mfg. Report (Sep)
  • Kaplan (Hawk)
  • Germany: Ifo (Sep)
  • US Presidential Debate (Hempstead, NY)
  • Japan: BOJ’s Kuroda Delivers Speech in Osaka, Japan
  • Eurozone: ECB’s Draghi Speaks in Brussels

Tuesday

Wednesday

  • Durable Goods Shipments and Orders (Aug)
  • Yellen (Dove)
  • Bullard (Dove)
  • Evans (Dove)
  • Mester (Hawk)
  • George (Hawk)

Thursday

  • Pending Home Sales (Aug)
  • Yellen (Dove)
  • Germany: Unemployment Change (Sep)
  • UK: Money Supply and Bank Lending (Aug)
  • Germany: CPI (Sep)
  • Japan: Minutes of the Sep 20-21 BOJ Meeting
  • China: Caixin Mfg. PMI (Sep)
  • Japan: Jobless Rate (Aug)
  • Japan: CPI (Aug)

Friday

  • Chicago Area PMI (Sep)
  • Eurozone: CPI (Sep)
  • China: Official Mfg. PMI (Sep)
  • China: Official Non-Mfg. PMI (Sep)

Saturday

  • Start of New Fiscal Year and Potential US Government Shutdown

Sunday

  • Japan: Tankan Survey (Q3)

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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