Market Update: Friday, November 4, 2016


  • Jobs report a slight miss, but focus remains on election. As a sign of the markets’ nearly singular focus on the pending U.S. presidential election, major indexes are showing little reaction to this morning’s nonfarm payrolls report, which was largely viewed as the last major hurdle to a potential rate hike at the Federal Reserve Bank’s (Fed) December meeting, pending unforeseen circumstances. With stocks moving lower at the open, the S&P 500 may fail to snap an eight-day losing streak, now the longest since 2008, following yesterday’s session in which it shed another 0.4%; dragged lower by the heavily weighted healthcare and technology sectors. Foreign indexes are red across the board with the Nikkei (-1.3%) leading losses in Asia, closing at its lowest level in two weeks after traders dismissed a strong service sector report, instead focusing on currency strength and the upcoming U.S. election. The Shanghai Composite was off 0.1%, though it managed a 0.7% gain for the week. European stocks aren’t faring much better in afternoon trading; the regional Stoxx 600 is down 1% and poised for its worst weekly performance since February. Meanwhile, WTI crude oil ($44.25/barrel) continues to slide, down another 0.8%, COMEX gold ($1302/oz.) is in the red despite the risk-off mood, and the yield on 10-year notes is falling, near 1.80%


  • Week ahead. It’s all about the election next week, as the domestic economic data calendar is quiet after the busy week. There are a few Fed speakers next week, and a number of second-tier central bank meetings. China will release its dataset for October next week, and Japan will release its Q3 gross domestic product (GDP) data, as will Malaysia and the Philippines.
  • October jobs report keeps Fed on track for December. The U.S. economy created 161,000 net new jobs in October, the unemployment rate fell to 4.9%, and average hourly earnings–a key gauge of wage pressures–accelerated to 2.8% year over year from 2.7% in September. Although the headline job count was slightly below expectations (173,000), the September reading was revised up by a whopping 35,000. The details of the report were solid but not spectacular. On balance, the report shows that the labor market continues to tighten and push up wages, keeping the Fed on track to hike rates in December.
  • Equities down again. The S&P 500 was down for the eighth consecutive day. The last time this happened was in October 2008, and June 1996 before that. Interestingly, both of those years were election years. The last time it was down nine straight was December 1980. The longest losing streak ever for the S&P 500 was 12 in a row in May 1966. The last time the S&P 500 was red all five days of the week was in May 2012. It could happen today if equities slip once again.
  • Could there be a big pullback after the election? With investors extremely nervous, some investors have growing concerns that we could see a big sell-off after the election is over. Going back to the 1952 election, the S&P in November and December has been up an average of 2.5% and higher 75% of the time. Additionally, November has closed the month beneath the low of October only five times since 1950. Incredibly, December has closed beneath the low in November only once in the past 66 years. Last, the average pullback from the close in October to the end of the year is 3.3% in an election year. Could there be a large drop before the end of the year? Of course, but history would say late-year sell-offs in elections years are very rare.



Employment Report (Oct)

Lockhart (Dove)

Fischer (Dove)

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.

A money market investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money markets have traditionally sought to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.

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.

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.

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 # 1-552395