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MARKET COMMENTARY March 7, 2016
The S&P 500 fell 0.8% on the last session of the month. This Leap Year trading day erased a monthly gain for the S&P 500 and the index finished February fractionally lower, posting its third consecutive monthly decline. Traders attributed the February 29 pullback to month-end profit-taking, following a 6.5% rebound rally during the two weeks since falling to a 22-month low on February 11. After investors wrestled in January with weak oil and slowing growth trends in China, which threatened to spill over to other world markets, February essentially benefited from signs of stabilization. Thanks in part to a pending oil production freeze deal led by Saudi Arabia and Russia, crude oil futures finished February with a 0.4% gain — its first monthly gain since October. Oil and other commodities advanced after China’s central bank relaxed its banking reserve requirement to help spur additional lending. In the U.S., recent economic data showed continued weak manufacturing readings, while inflation ticked slightly higher and retail sales remained resilient. Commerce officials also upwardly revised their annualized estimate of fourth quarter gross domestic product (GDP) growth from 0.7% to 1%. The Atlanta Fed’s GDPNow forecast points to first quarter GDP growth of 1.9%, with consumer spending expected to increase by 3.1%. GDPNow digests incoming economic data from the 13 subcomponents that comprise GDP and forecasts upcoming GDP growth.
1000 Value Index slipping 0.03% and the Russell 1000 Growth Index falling 0.04%. Internationally, the MSCI EAFE Index, a broad measure of global developed markets outside of the U.S. and Canada, fell 1.83% last month. The STOXX Europe 600 ended the month with its first three-day rally of the year, paring its February loss to 2.12%. Japan’s Nikkei 225 Index sank over 8% for a second month. The MSCI Emerging Markets Index fared better, falling just 0.16% in February. China’s Shanghai Composite Index extended January’s near 23% plunge, falling 1.80% last month Treasuries, as measured by the Barclays U.S. Government Bond Index, gained 0.86% in February, extending its YTD gain to 2.95%. Benchmark 10-year U.S. Treasuries rallied in February, sending its yield down nearly twenty basis points during the month to end at 1.736%. The Barclays U.S. Municipal Bond Index rose 0.16% in February. U.S. investment grade corporate, government and agency-backed bonds, as measured by the Barclays U.S. Aggregate Bond Index, gained 0.71% last month. At the other end of the credit spectrum, the Barclays U.S. Corporate High Yield Index, a proxy for below-investment grade corporate bonds, rose 0.57% in February, trimming its YTD loss to 1.04%.
Six of the ten major sector groups advanced in February, with Materials (+7.60%), Industrials (+3.99%) and Telecom (+2.69%) having the strongest gains. Financials (-2.94%) was the worst performer in February. On a year-to-date (YTD) basis, Telecom (+9.64%) is up the most, while Financials (-11.53%) is down the most. Mid-cap domestic stocks, as measured by the Russell Mid-Cap Index, rose 1.13% in February, widely outperforming its large and small-cap counterparts. Small-cap stocks, as measured by the Russell 2000 Index, were unchanged. Value stocks slightly outperformed growth in February, with the Russell 1920 Main Street, Suite 800, Irvine, CA 92614 | T 949.955.1395 | 800.814.8742 | F 949.955.1991 | www.sageviewadvisory.com Registered Representative with and securities offered through Cetera Advisor Networks LLC, doing insurance business in CA as CFGAN insurance agency. Member FINRA/SIPC. SageView is not affiliated with Cetera Advisor Networks LLC.
Market Commentary, February 2016
Page 2
SUMMARY OF MAJOR ECONOMIC INDICATORS INDICATOR
LAST REPORT DATE
VALUE*
6-MO. TREND
U.S. Real GDP (ann. rate) *
Q4 2015
1.0%
Global Real GDP Growth (ann. rate; Source: IMF)
Q3 2015
3.0%
n/a
Non-Farm Employment Growth
Feb 2016
242,000
Unemployment Rate
Feb 2016
4.9%
ISM Manufacturing Index
Feb 2016
49.5
ISM NonManufacturing Index
Feb 2016
53.4
Capacity Utilization
Jan 2016
77.1
Consumer Price Index (CPI, NSA)
Jan 2016
0.2%
Producer Price Index (Finished Goods, NSA)
Jan 2016
0.1%
Leading Economic Indicators Index (LEI)
Jan 2016
-0.2%
10-year Treasury Yield
Feb 2016
1.74%
COMMENTS
The final estimate for Q4 GDP increased to 1.0%, from 0.7% previously. The increase was due to personal consumption, residential fixed investment, and federal government spending. Growth around the globe was characterized by lower commodity prices, slowing growth in China, weakening currencies in emerging countries and uneven growth in developed economies. Non-farm employment increased by 242,000 in February, a large increase from 172,000 the prior month. Job gains have averaged 228,000 over the past 3 months. The unemployment rate was unchanged in February at 4.9%, while the participation rate rose by 0.2 to 62.9%. This low level of unemployment is leading to rising wage pressures in several sectors. February’s PMI edged up to 49.5, which represents the 5th consecutive month of contraction in the manufacturing sector. Only half of the manufacturing industries reported growth in February. February NMI registered 53.4%. This represents continued growth in the non-manufacturing sector, but at a slower rate. Capacity utilization for the industrial sector increased 0.7% in January to 77.1. The utilization rates for manufacturing, mining, and utilities all rose from the previous month. Prices rose in January on a non-seasonally adjusted basis. The energy index fell by 2.8% and consumers are paying more than 50% less for a gallon of gas than 2 years ago. PPI advanced 0.1% in January. The index for final demand services rose 0.5%, while lower energy prices sent goods prices lower. Leading indicators declined 0.2% in January, driven by declines in stock prices and further weakness in initial claims for unemployment insurance. Despite two consecutive months of declines, the index doesn’t signal a significant risk of recession. The 10-year Treasury yield ended February at 1.74%, a significant decrease from the prior month end. Demand for bonds has increased amid fears of slowing global growth, pushing yields lower.
*NOTE: The “Value” column shows the most current level or change over the prior month or quarter.
1920 Main Street, Suite 800, Irvine, CA 92614 | T 949.955.1395 | 800.814.8742 | F 949.955.1991 | www.sageviewadvisory.com Registered Representative with and securities offered through Cetera Advisor Networks LLC, doing insurance business in CA as CFGAN insurance agency. Member FINRA/SIPC. SageView is not affiliated with Cetera Advisor Networks LLC.
Market Commentary, February 2016
Page 3
GLOBAL CAPITAL MARKETS: RETURNS AND PRICE LEVELS February Close US Indices Dow Jones 30 S&P 500 Nasdaq Russell 2000 International Indices MSCI EAFE (Developed) MSCI EM (Emerging) US Fixed Income Barclays US Aggregate Barclays US TIPS Commodities and Real Estate Bloomberg Commodity Index Crude Oil ($/bbl) DJ US Select REIT
February
Year- toDate
1 year
3 years
5 years
16,517 1,932 4,558 1,034
0.75% -0.13% -1.03% 0.00%
-4.68% -5.09% -8.76% -8.80%
-6.55% -6.19% -7.07% -14.97%
8.14% 10.75% 14.38% 5.72%
8.94% 10.13% 11.72% 6.11%
5,812 1,532
-1.80% -0.15%
-8.89% -6.62%
-14.80% -23.13%
0.81% -8.58%
1.01% -5.08%
-----
0.71% 0.89%
2.10% 1.99%
1.50% -0.32%
2.22% -1.22%
3.40% 2.58%
153 --8,379
-1.63% $33.75 -0.90%
-3.28% $37.04 -4.81%
-26.50% $49.76 -3.32%
-17.71% $92.059 8.42%
-14.44% $96.97 9.47%
Sources: Bloomberg, MSCI. Non-US index returns are shown in US Dollar terms and are considered to be currency unhedged. Total returns include dividend and income accruals and price changes. Returns for three and five years are annualized and assume the reinvestment of interest and dividend payments. Investors cannot invest directly in any of the above indices. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. IMPORTANT DISCLOSURES: The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Please consult with your financial advisor before making any investment decisions. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, SageView Advisory Group shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. Please note references to specific securities, mutual funds or other investment options within this piece should not be considered an offer (as defined by the Securities and Exchange Act) to purchase or sell that specific investment. Past performance does not indicate or guarantee future returns. An investment’s value will fluctuate, in which case an individual’s investment, when redeemed, may be worth more or less than the original investment. Investors cannot invest directly in an index. This information is compiled by Cetera Financial Group and SageView Advisory group. No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot directly invest in unmanaged indices. Please consult your financial advisor for more information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards. Affiliates and subsidiaries and/or officers and employees of Cetera Financial Group or Cetera Advisor Networks LLC may from time to time acquire, hold or sell a position in the securities mentioned herein. © SageView Advisory Group, February 2016.
1920 Main Street, Suite 800, Irvine, CA 92614 | T 949.955.1395 | 800.814.8742 | F 949.955.1991 | www.sageviewadvisory.com Registered Representative with and securities offered through Cetera Advisor Networks LLC, doing insurance business in CA as CFGAN insurance agency. Member FINRA/SIPC. SageView is not affiliated with Cetera Advisor Networks LLC.
