Market Update: Wednesday, July 12, 2017


Yesterday’s Market Activity

  • Major U.S. indexes flat amid rocky session. U.S. indexes slid early after Donald Trump Jr. emails surfaced about meeting with Russian lawyer; buying resumed in afternoon following notice of two-week delay in Senate summer recess to focus on getting healthcare reform bill through.
  • S&P 500 (-0.1%), Nasdaq (+0.3%), Dow unchanged.
  • Energy (+0.5%) led on oil gains; technology the only other sector to finish higher.
  • Treasuries yields fell for second day with yield curve steepening.
  • Precious, industrial metals up despite dollar strength. COMEX gold (+0.1%, $1215/oz.).
  • NFIB small business optimism dropped slightly, but still near decades-highs.

Overnight & This Morning

  • Asian equities mixed overnight; Nikkei -0.5% on yen strength ahead of Fed Chair Janet Yellen’s testimony.
  • European stocks broadly higher after Eurozone Industrial Production came in above expectations; STOXX Europe 600 +0.8%.
  • Commodities – WTI crude oil ($45.68/bbl.) +1.4%, gold ($1217/oz.) little changed, copper +0.8%.
  • Yield curve is flattening as longer-term notes strengthen; 10-year yield -4 basis points (0.04%) to 2.32%.
  • Major U.S. indexes up near 1% in early trading. S&P 500 (+0.7%), Nasdaq (+0.9%), Dow (+0.7%).
  • Janet Yellen heads to Capitol Hill to address Congress in her twice yearly Humphrey Hawkins testimony. Interest rates, timing of Fed balance sheet unwind will be two of the most important topics.



Key Insights

  • The S&P 500 has officially gone more than one-year without a 5% correction (using closing prices). This is only the sixth time since 1950[1] that it has ever made it this far without a 5% correction and the first time since 1995. The longest streak ever was a nearly 20-month streak ending in July 1996. It is important to note to clients how rare the recent action has been and how some second half volatility could be perfectly normal. Today, on the LPL Research blog, we will take a look at this incredible streak and where it ranks in history, along with what it might mean for the future.
  • Pullbacks are normal. Going back to 1950, we found that 91% of all years pulled back at least 5% at some point during the calendar year. Taking it a step further, 53.7% of all years pulled back at least 10% at some point during the year. In other words, historically, the 2.8% pullback so far in 2017 is extremely rare and the odds do favor a larger pullback sometime later this year.

[1] Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.


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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.

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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.

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.

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