Just How Boring Have Things Been? (Part 2)

After 10 days of the year, the S&P 500 is up 1.3%, which might not sound like much, but it is a lot better than the down 8.0% after the first 10 days of 2016. As we mentioned yesterday, the Dow is in a historically tight trading range over the past month, and today we will take a look at some interesting stats from the S&P 500 recently.

  • Since Thanksgiving 2016, the S&P 500 has alternated between higher and lower for the week for eight consecutive weeks—for only the tenth time since 1928.* There was a record streak of 11 alternating weeks back in 2015.
  • The S&P 500 hasn’t closed more than 1.5% away from an all-time high for 46 consecutive days, the longest streak since 72 in a row in summer 2014 and early 1995.
  • On an intraday basis, the S&P 500 hasn’t had a 1% intraday move for 21 consecutive days—the longest streak since 25 in a row in late 2014.
  • Over the past month (21 trading days), the S&P 500 has traded in a range of only 1.7% (using closing prices). Other times we’ve seen ranges like this were September 2016, September 2014, January 2014, April 2013, September 2012, and January 2007. In other words, what we’ve seen over the past month is very rare, and usually we see surges in volatility over the coming months after periods like now.
  • The S&P 500 has now gone 66 consecutive days without a 1% drop, tying the 66 days from summer 2014.

01-18-17-fig-1

  • Last, the CBOE Volatility Index (VIX) was beneath its long-term average of 19.7 for the fifth consecutive year in 2016. As this chart shows, volatility rarely stays this low for this long. Per Ryan Detrick, Senior Market Strategist, “Of course, it doesn’t mean volatility can’t be beneath the long-term average for another year or two, but be aware this period of a lull in volatility is getting long in the tooth. Coupled with economic uncertainty, despite some upside to growth prospects with the new administration, this further increases the chances of much more volatility later this year.”

01-18-17-fig-2

IMPORTANT DISCLOSURES

*Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1928 incorporates the performance of predecessor index, the S&P 90.

Past performance is no guarantee of future results.

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.
The economic forecasts set forth in the presentation may not develop as predicted.

Indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not ensure against market risk.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The VIX is a measure of the volatility implied in the prices of options contracts for the S&P 500. It is a market-based estimate of future volatility. When sentiment reaches one extreme or the other, the market typically reverses course. While this is not necessarily predictive, it does measure the current degree of fear present in the stock market.

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
Member FINRA/SIPC

Tracking #1-573170 (Exp. 1/18)

Market Update: Monday, October 3, 2016

MarketUpdate_header

  • Global markets assess oil rally and Brexit update. U.S. stocks are lower this morning after closing the third quarter on a positive note. The financial and energy sectors led Friday’s rally, boosted by reports that Deutsche Bank may have reached a settlement to reduce the $14 billion fine levied by the U.S. Department of Justice and that OPEC may be on track to reduce output; WTI crude oil sits at $48.20/barrel. The British pound is falling against other currencies after U.K. Prime Minister Theresa May promised a swift exit from the European Union; U.K. stocks are markedly higher though the rest of Europe is near flat in afternoon trade. Overnight, the Nikkei Index gained 0.9% while Hong Kong’s Hang Seng rose 1.2% on mixed Purchasing Managers’ Index (PMI) data; the Shanghai Composite is closed all week for a holiday. Meanwhile, COMEX gold ($1316/oz.) is modestly lower and weakness in Treasuries has lifted the yield on the 10-year note to 1.62%.

MacroView_header

  • Welcome to the fourth quarter. After a strong third quarter for equities, here comes the historically most bullish quarter of the year. In fact, going back to 1950, the fourth quarter is the best quarter of the year for equities, with the S&P 500 up 4.1% on average and higher 78.8% of the time. The catch is that we are in a presidential election year and the fourth quarter during these years has been lower three of the past four cycles. Turning to October, no month is more volatile going back to 1950, as the average range (low to high) during this month is 7.3%–the most out of any month. Lately though, this month has been very strong–up 2.1% on average the past 20 years, ranking it as the top month of the year. In the Weekly Market Commentary, due out later today, we take a closer look at this time of the year and what could be in store for 2016.
  • October volatility during an election year? October has a reputation as a volatile month, thanks to some huge drops. It is worthy though, as no month has a wider range at 7.3% (low to high) since 1950. What happens during an election year? You’d think ahead of a presidential election there would be a lot of volatility, but surprisingly that hasn’t been the case. Today on the LPL Research blog we will take a closer look at this phenomenon and how it relates to the presidential cycle.
  • Taking a closer look at trade. As the election nears, we see how rules on international trade, and globalization as a concept, have impacted American politics. There have always been skeptics on trade from both the traditional “right” and “left” of the political spectrum. That skepticism has become the dominant view of trade, expressed by both presidential candidates. In this week’s Weekly Economic Commentary, due out later today, we will take a look at how our nation views foreign trade.
  • Week ahead. The September jobs report (due out Friday, October 7) concludes a busy week of data and events as markets gauge the health of the economy as Q3 ended and Q4 began. The September Institute for Supply Management (ISM) reading and vehicle sales will be closely watched as well, ahead of the start of Q3 earnings reporting season, which begins in mid-October. There are 10 more Federal Reserve Bank (Fed) speakers on the docket this week (after 13 last week), including an appearance from Fed Vice Chair Fischer. Overseas central banks in India and Australia will meet this week, and the International Monetary Fund (IMF)/World Bank’s annual meeting begins in Washington late this week.

MonitoringWeek_header 

Monday

Tuesday

  • Vehicle Sales (Sep)
  • US Vice Presidential Debate (Farmville, VA)
  • Lacker (Hawk)
  • India: Reserve Bank of India Meeting (No Change Expected)

Wednesday

Thursday

  • Challenger Job Cut Announcements (Sep)

Friday

  • Employment Report (Sep)
  • Fischer (Dove)
  • George (Hawk)
  • IMF/World Bank Fall meetings in Washington, DC
  • China: Caixin Services PMI (Sep)

Saturday

  • IMF/World Bank Fall meetings in Washington, DC

Sunday

  • IMF/World Bank Fall meetings in Washington, DC

 

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.

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

Member FINRA/SIPC
Tracking # 1-541438

Market Update: Friday, September 30, 2016

MarketUpdate_header

  • U.S. stocks advance after Europe-focused selloff yesterday. Domestic markets opened higher this morning even as investors grapple with headline issues out of the European banking sector. The S&P 500 dipped 0.9% yesterday as healthcare (-1.8%), financials (-1.5%), and utilities (-1.5%) led the decline, while energy (-0.1%) outperformed as it has for much of the last week thanks to an ongoing rally in crude. European shares are mostly down, though well off of session lows, as concerns mount about the risks that Deutsche Bank may pose to the European banking system. In Asia, the Nikkei (-1.5%) sank amid a slew of economic reports, and the Hang Seng also lost ground; the Shanghai Composite finished with modest gains. Elsewhere, WTI crude oil ($48.15/barrel) is up half a percent this morning after climbing to fresh 3-week highs yesterday. Meanwhile, there is mild weakness in Treasuries as the yield on the 10-year note is up to 1.58%, while COMEX gold ($1325/oz.) sits near the middle of its range for the month.

MacroView_header

  • European bank concerns grow. The largest bank in Germany, Deutsche Bank, dropped nearly 7% yesterday on a report from Bloomberg that a number of funds that clear derivatives with the bank have lowered excess cash and reduced positions with the bank. This news came out midday and it sparked the sell-off in U.S. markets. How concerned should you be around the European banking problem? Here’s the catch, this is nothing new. Many European banks were down significantly over the past year, well before yesterday’s news hit. Today on the LPL Research blog, we will take a look at this very important development.
  • Another big daily swing. The S&P 500 dropped 0.9% yesterday, for its largest daily drop since September 13. The Deutsche Bank worries sparked the equity weakness, with financials and healthcare the big underperformers on the day. All 11 S&P 500 sectors were lower, with energy (down 0.1%) the strongest. One thing is certain though, it is late September and volatility continues to increase. As we’ve been noting, the last few weeks of September until late October are historically the most volatile time of the year, and that is playing out so far. Technically, the S&P 500 found trouble near its flattening 50-day moving average and this was the seventh straight day the S&P 500 closed higher or lower by half a percent. That is the longest streak since eight in a row in late January.
  • Private sector stability in China. The Caixin Purchasing Managers’ Index (PMI) for manufacturing in August was released at 50.1, consistent with expectations. The Caixin index is important, as it is a private sector company that works with smaller and midsized companies in the country, companies that are not heavily influenced by the government. This survey gives insight into the true situation in China. The data show stability, but not reacceleration of the Chinese economy.
  • Week ahead. The September jobs report (due out Friday, October 7) concludes a busy week of data and events as markets gauge the health of the economy as Q3 ended and Q4 began. The September Institute for Supply Management (ISM) reading and vehicle sales will be closely watched as well, ahead of the start of Q3 earnings reporting season, which begins in mid-October. There are 10 more Federal Reserve Bank (Fed) speakers on the docket next week (after 13 this week), including an appearance from Fed Vice Chair Fischer. Overseas, China will release its PMI data for September over the weekend, and central bankers in India and Australia will meet next week. Japan’s key Tankan data for Q3 is due out over the weekend, so markets will already be reacting to it as trading resumes on Monday, October 3.

MonitoringWeek_header 

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.

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

Member FINRA/SIPC
Tracking # 1-540926