September Economic Report Month ending September 30, 2015
MARKET DASHBOARD 2200 2150 2100 2050 2000 1950 1900 1850 1800 1750 1700 4/6 4/20 5/4 5/18 6/1 6/15 6/29 7/13 7/27 8/10 8/24 9/7 9/21 S&P 500 : Trailing 180 Days Last Price Change % Chg. YTD % Last Price Change % Chg. YTD % S&P 500 1,951.36 20.02 1.04% -5.2% Russell Global EM 2,475.09 23.59 0.95% -16.2% Dow Industrials 16,472.37 157.70 0.97% -7.6% 10-Year US Treas. 1.99-18 bps NM NM Nasdaq 4,707.77 21.28 0.45% -0.6% DJ UBS Comm. Idx. 87.89-0.60-0.68% -15.8% Russell 2000 1,114.12-8.67-0.77% -7.5% Gold $1,139.40 -$7.58-0.66% -3.9% Euro Stoxx 347.86-1.42-0.41% 1.6% Crude Oil $45.64 -$0.10-0.22% -22.4% Shanghai Composite 3,052.78-63.11-2.03% -5.6% Dollar 95.88-0.36-0.38% 6.2% Russell Global 1,565.12-6.11-0.38% -7.9% VIX 20.94-2.68-11.35% 9.1% ; % change is based on price. L S Value One Week 1.36% 1.13% 0.92% 0.58% 0.29% 0.00% Growth -0.65% -0.77% -0.90% Value -10.80% YTD -7.52% Growth -9.91% -4.93% 0.10% -7.84% -5.50% -3.27% -4.26% Sector Performance: S&P/Global Industry Classification Sectors (GICS) % Wgt in S&P 500 Week % Chg. YTD % Chg. Consumer Discretionary 13.2 1.55% 5.1% Consumer Staples 9.9 0.64% -1.7% Energy 7.1 2.81% -19.9% Financials 16.3-0.60% -8.3% Health Care 14.9 2.07% -0.4% Industrials 10.0 1.18% -10.4% Information Technology 20.4 0.77% -2.7% Materials 2.9 2.71% -14.9% Telecom Services 2.4-1.06% -8.0% Utilities 3.1 1.35% -8.4% 45 40 35 30 25 20 15 VIX : Trailing 180 Days 10 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 1.4 1.3 1.2 1.1 1 0.9 0.8 0.7 Wealth Growth of $1: Trailing 24 Months Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 S&P 500 Dow Industrials Small Cap EAFE Emerging Mkts. 1
THE ECONOMY AND MARKETS A Macro View September Monthly Recap Domestic equity markets continued to decline during the month, as investors reacted to the ongoing losses in Chinese equities and the Federal Reserve s decision not to raise interest rates at its recent meeting. Stocks also are confronting negative seasonal headwinds, as September and early October are historically two of the most disappointing periods for stocks. Chinese equity markets remain mired in a downward spiral that began earlier this summer. With China s slowing growth, policymakers devalued the Chinese currency in order to boost exports. Investors perceived the devaluation as confirmation that authorities were concerned about future growth prospects. The Fed s decision not to initiate the so-called lift-off also caused investor consternation, as many had anticipated that the Fed would finally begin to normalize rates. In its statement, the Fed mentioned global growth concerns and the recent financial market distress as reasons it would refrain from moving at that particular time. However, many analysts continue to believe the Fed will vote to raise rates sometime before the end of the year. Within this landscape, stocks gave up ground once again in September. The S&P 500 fell by -2.5% for the month, and is down -5.3% year-to-date. The Dow Jones Industrials (DJIA) posted a more modest decline of 1.4% for the month. The techheavy Nasdaq Composite slumped -3.2% in September. Continuing a recent trend, the Russell 2000 of small cap stocks underperformed the Russell 1000 of large cap stocks, with returns of 4.9% and -2.7%, respectively. Growth stocks again underperformed value stocks during the month. In terms of sector performance, the top performers in the month were utilities, consumer staples and consumer discretionary, with returns of +2.9%, +0.5% and -0.6%, respectively. Materials and energy were the poorest performers, with returns of -7.4% and -6.7%, respectively. Commodities also posted another month of dismal performance, declining -3.4%. REITs bucked the trend, and advanced +3.4%. International equity markets also fared poorly in September, dropping more than U.S. markets. Consumer prices fell during the month, marking the first time that occurred since the European Central Bank (ECB) instituted its asset-purchase program earlier in the year. Investors feared that further declines would create a deflationary spiral, and are urging the ECB to step up its stimulus. The MSCI World ex-u.s. declined -5.0% for the month, and is now down -6.2% year-to-date. Emerging markets were also hit hard, being negatively affected by the ongoing deterioration in commodities prices. The MSCI Emerging Markets fell by -3.0% for the month, and the MSCI EAFE, which measures developed markets performance, was down -5.0%. Regionally, Asia generated the best relative performance, but still dropped -1.5%. Latin America was the poorest performer, plummeting -7.7% during the month. Fixed-income markets fared somewhat better than equity markets during September, with every major segment except for high yield delivering modestly positive returns. Given the disruption and volatility in equities, along with the Fed s decision to delay a rate hike, Treasury prices gained ground during the month. Within this environment, the 10-year U.S. Treasury yield ended the month at 2.06%, down 14 basis points from the 2.20% level of August 31st. Broad-based fixed-income indices were higher in September, with the Barclays U.S. Aggregate Bond advancing +0.7% for the month. Global fixed-income markets posted a second consecutive monthly gain of +0.4%. Intermediate-term corporate bonds were modestly higher, as the Barclays U.S. Corporate 5-10 Year edged up by +1.00%. The Barclays U.S. Corporate High Yield declined by -2.6%, and are down -4.9% over the past three months. Municipals fared well again, advancing +0.7% for September. Brandon Thomas Chief Investment Officer, Envestnet PMC Envestnet PMC and McGladrey Wealth Management LLC are not affiliated and there is no ownership interest between the two firms. 2
EUROZONE SELECTED EUROPEAN SOVEREIGN YIELD PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % Germany 10-Yr. Govt. 0.51 13 bps NM NM France 10-Yr. Govt. 0.89 15 bps NM NM Greece 10-Yr. Govt. 8.02 4 bps NM NM Ireland 10-Yr. Govt. 1.12 14 bps NM NM Italy 10-Yr. Govt. 1.63 14 bps NM NM Portugal 10-Yr. Govt. 2.29 23 bps NM NM Spain 10-Yr. Govt. 1.77 24 bps NM NM Netherlands 10-Yr. Govt. 0.69 12 bps NM NM Belgium 10-Yr. Govt. 0.82 13 bps NM NM U.K. 10-Yr. Govt. 1.70 13 bps NM NM Basis points (bps) % Germany 10-Year Government Bond Yield 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Spain 10-Year Government Bond Yield 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 % 2.5 Italy 10-Year Government Bond Yield 20.0 Greece 10-Year Government Bond Yield 2.3 18.0 2.1 16.0 % 1.9 1.7 % 14.0 12.0 10.0 1.5 8.0 1.3 6.0 1.1 4.0 3
EQUITIES WORLD MARKET PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % S&P 500 1,951.36 20.02 1.04% -5.22% Swiss Market 8,515.52 9.58 0.11% -5.21% Dow Industrials 16,472.37 157.70 0.97% -7.58% CAC 40 (France) 4,458.88-21.78-0.49% 4.36% Nasdaq Composite 4,707.77 21.28 0.45% -0.60% DAX (Germany) 9,553.07-135.46-1.40% -2.57% Russell Global 1,565.12-6.11-0.38% -7.9% Irish Overall 6,091.26-213.02-3.38% 16.59% Russell Global EM 2,475.09 23.59 0.95% -16.2% Nikkei 225 17,725.13-155.38-0.87% 1.57% S&P/TSX (Canada) 13,339.74-38.83-0.29% -8.83% Hang Seng 21,506.09 203.18 0.95% -8.89% Mexico IPC 42,735.15 299.92 0.71% -0.95% Shanghai Composite 3,052.78-63.11-2.03% -5.62% Brazil Bovespa 47,033.46 2202.00 4.91% -5.95% Kospi (S. Korea) 1,969.68 25.04 1.29% 2.82% Euro Stoxx 600 347.86-1.42-0.41% 1.55% Taiwan Taiex 8,305.03 172.68 2.12% -10.77% FTSE 100 6,129.98 20.97 0.34% -6.64% Tel Aviv 25 1,488.54-35.54-2.33% 1.61% IBEX 35 (Spain) 9,603.60 84.10 0.88% -6.58% MICEX (Russia) 1,612.56-27.08-1.65% 15.46% ; % change is based on price. Dow Jones Industrial Average -Trailing 90 Days 18,500 18,000 17,500 17,000 16,500 16,000 15,500 15,000 14,500 14,000 Nasdaq Composite-Trailing 90 Days 5,400 5,200 5,000 4,800 4,600 4,400 4,200 4,000 4,500 Shanghai Composite -Trailing 90 Days 420 Euro Stoxx -Trailing 90 Days 4,000 400 3,500 380 3,000 360 340 2,500 320 2,000 300 4
INTEREST RATES SELECTED INTEREST RATES Last Change % Chg. YTD % Last Change % Chg. YTD % 2-Yr. U.S. Treasury 0.58% 2 bps NM NM Prime Rate 3.25% 0.00 NM NM 5-Yr. U.S. Treasury 1.29% -19 bps NM NM Fed Funds Rate 0.25% 0.00 NM NM 10-Yr. U.S. Treasury 1.99% -18 bps NM NM Discount Rate 0.75% 0.00 NM NM 30-Yr. U.S. Treasury 2.83% -13 bps NM NM LIBOR (3 Mo.) 0.32% 0 bps NM NM German 10-Yr. Govt. 0.51% 13 bps NM NM Bond Buyer 40 Muni 4.00% -8 bps NM NM France 10-Yr. 0.89% 15 bps NM NM Bond Buyer 40 G.O. 3.67% NA NM NM Italy 10-Yr. 1.63% 14 bps NM NM Bond Buyer 40 Rev. 4.06% NA NM NM Fed 5-Yr Fwd BE Inf. 1.65% -8 bps NM NM 6.00 5.00 YIELD CURVES 4.00 3.00 US Treasury Actives Curve 20150925 US Treasury Actives Curve 20151002 USD US Industrial (BB) BFV Cur 20151003 USD Composite (BBB) BFV Curve 20151003 2.00 1.00 0.00 1M 1Y 3Y 5Y 8Y 10Y 15Y 20Y 30Y -1.00 2.70 10-Year Treasury Yield - Trailing 180 Days 2.20 BBB/Baa- 10-Yr Treas. Spread Rising Line = Risk Aversion 2.50 2.00 2.30 1.80 Yield % 2.10 1.60 1.90 1.40 1.70 1.20 1.50 1.00 5
CURRENCIES SELECTED CURRENCY PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % Dollar 95.89-0.363-0.38% 6.24% Chinese Yuan 6.36-0.017 0.27% -2.38% Euro 1.12 0.002 0.20% -7.28% Swiss Franc 0.97-0.008 0.81% 2.34% Japanese Yen 119.93-0.640 0.53% -0.14% New Zealand Dollar 0.64 0.006 0.92% -17.35% British Pound 1.52-0.001-0.03% -2.58% Brazilian Real 3.93-0.043 1.09% -32.42% Canadian Dollar 1.32-0.016 1.25% -11.78% Mexican Peso 16.75-0.220 1.32% -11.94% 100 U.S. Dollar - Trailing Six Months 1.20 Euro - U.S. Dollars per Euro 98 1.15 1.10 96 1.05 94 1.00 92 0.95 0.90 90 0.85 88 0.80 6.45 Chinese yuan - yuan per U.S. Dollar 128.00 Japanese yen - Yen per U.S. Dollar 6.40 126.00 6.35 124.00 6.30 6.25 6.20 122.00 120.00 6.15 118.00 6.10 116.00 6.05 4/7 5/7 6/7 7/7 8/7 9/7 114.00 6
COMMODITIES SELECTED COMMODITY MARKET PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % DJ UBS Comm. Idx. 87.89-0.60-0.68% -15.76% Platinum Spot $910.50 -$36.30-3.84% -24.65% Rogers Int. Comm. Idx. 2274.29-11.65-0.51% -18.56% Corn 389.25 0.25 0.06% -7.54% Crude Oil $45.63 -$0.10-0.22% -22.44% Wheat 513.25 5.50 1.08% -16.51% Natural Gas $2.47 -$0.17-6.35% -22.27% Soybeans 874.25-15.00-1.69% -13.05% Gasoline ($/Gal.) $2.29 $0.01 0.31% 2.41% Sugar 13.53 1.12 9.02% -17.60% Heating Oil 152.24-2.35-1.52% -19.90% Orange Juice 105.35-2.70-2.50% -26.79% Gold Spot $1,139.30 -$7.58-0.66% -3.86% Aluminum 1,566.00-1.00-0.06% -15.47% Silver Spot $15.24 $0.12 0.80% -3.05% Copper 5,095.00 72.00 1.43% -19.13% ; % change is based on price. 70 Crude Oil - Light Crude ($ per barrel) 1,250 Gold - Spot gold price ($ per ounce) 60 1,200 50 $ per barrel 40 30 20 10 $ per ounce 1,150 1,100 1,050 0 1,000 7,000 Copper 500 Corn - Active Contract 6,000 450 400 5,000 350 4,000 3,000 2,000 1,000 0 4/7 5/7 6/6 7/6 8/5 9/4 $ per bushel 300 250 200 150 100 50 0 7
ALTERNATIVE INVESTMENTS SELECTED ALTERNATIVE INVESTMENT INDEX PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % HFRX Global Hedge Fund 1175.57-8.73-0.73% -3.05% HFRX Distressed 956.65-6.67-0.69% -4.74% HFRX Equity Market Neutral 1027.15 1.18 0.11% 4.54% HFRX Merger Arbitrage 1673.22 2.19 0.13% 5.03% HFRX Equity Hedge 1134.83-8.38-0.73% -3.13% HFRX Convertible Arbitrage 715.77-5.95-0.83% 1.34% HFRX Event-Driven 1406.43-16.93-1.18% -6.37% HFRX Macro CTA 1173.58 3.65 0.31% -1.56% HFRX Absolute Return 1015.89-0.79-0.08% 2.63% IQ Fixed Income Beta Arb 1391.90 14.65 1.06% 0.31% ; % change is based on price. HFRX Global Hedge Fund - Trailing 90 Days 1,260 HFRX Equity Hedge - Trailing 90 Days 1,240 1,240 1,220 1,200 1,220 1,180 1,200 1,160 1,180 1,140 1,120 1,160 1,100 1,140 1,080 1,040 HFRX Equity Market Neutral - Trailing 90 Days 1,390 IQ Fixed Income Beta Arb - Trailing 90 Days 1,030 1,385 1,020 1,380 1,010 1,000 990 1,375 1,370 1,365 1,360 980 1,355 970 1,350 960 1,345 8
PORTFOLIO CONSTRUCTION S&P 500/MSCI EAFE - Trailing 180 Days 3.45 3.40 3.35 3.30 3.25 3.20 3.15 3.10 3.05 3.00 2.95 S&P 500/MSCI EM - Trailing 180 Days 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 MSCI EAFE/MSCI EM - Trailing 180 Days 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Large Cap/Small Cap - Trailing 180 Days 0.41 0.40 0.40 0.39 0.39 0.38 0.38 0.37 0.37 0.36 0.84 Growth/Value - Trailing 180 Days 0.83 0.82 0.81 0.80 0.79 0.78 0.77 0.76 9
PORTFOLIO CONSTRUCTION (cont d.) Info Tech/S&P 500 - Trailing 180 Days 0.208 0.206 0.204 0.202 0.200 0.198 0.196 0.194 1.88 1.86 1.84 1.82 1.80 1.78 1.76 1.74 1.72 Inv. Grade Bonds/Int. Govt. Bonds - Trailing 180 Days 1.70 High Yield Bonds/Int. Govt. Bonds - Trailing 180 Days 0.62 0.60 0.58 0.56 0.54 0.52 0.50 High Yield/Inv. Grade Bonds - Trailing 180 Days 0.340 0.335 0.330 0.325 0.320 0.315 0.310 0.305 0.300 0.295 0.290 10
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