DIS and DAT - Market Update, September 2016

The ultimate authority must always rest with the individual's own reason and critical analysis.
~Dalai Lama

     With earnings season out of the way, the summer doldrums were in full effect across equity markets in August. The S&P500 ended the month basically where it began, trading within +1/-1% of the July close. International Developed Markets was just as muted, finishing up 0.07%. Small Caps, particularly Small Cap Value, outperformed Large Caps. Looking at the sectors of the S&P500, Financials finally caught a bid after underperforming for most of 2016. They benefitted from interest rates starting to tick up after a strong July jobs report, possibly leading the Fed to raise interest rates in September. Of course this caused the interest rate sensitive sectors like Telecoms and Utilities to both fall more than 5%. Even after the sharp drop, those are still the best performing S&P500 sectors year-to-date.

     Interest rates had a pretty quiet August as well. Rates across the curve moved up slightly, but the largest moves were made on the short end. This was in reaction to the increased possibility that the Fed may raise rates in September. The Fed controls the overnight Fed funds rate, so any decision they make will most impact on shorter term rates. The long end has more to do with the economic and inflation expectations. The best performing sector in the Fixed Income asset class continues to be Junk Bonds and Emerging Market Debt, as some investors are apparently more interested in yield than the risk in credit quality. 

     Commodities were the most volatile asset class but what’s new. Oil was particularly volatile, beginning the month around $40/barrel, rallying to break $50/barrel, only to fall back to the mid $40’s. The oil market continues to hang on whispers out of OPEC and what they will do with production. On one day there is speculation of OPEC cutting production sending crude rocketing higher; only to have whispers the following day saying production is staying the same, erasing the previous gains. Oil has now been trading between $40 and $50/barrel for 5 months now. Gold and Silver had a rough April but are still up nicely in 2016.

     Looking forward, September could be an interesting month with the Fed decision looming, market participants coming back from Summer, as well as the November election getting closer. So be sure to tune in next month for our detailed quarterly review of the markets and what it possibly means for your portfolio.

Performance Review by the Numbers

Here’s an updated performance review, which is not indicative of future results.

Index                                  Y-T-D                    1 Year               5 year(annualized)

SP 500                                 7.82%                  12.55%                   14.69%

SP 500 Value                       9.77%                  13.17%                   14.17%

SP 500 Growth                    5.96%                  11.77%                   15.13%

Russell 2000 Growth            5.96%                   3.55%                   13.02%

Russell 2000 Value              14.58%                13.80%                  12.63%

Aggregate Bond                     5.86%                  5.97%                    3.24%

MSCI EAFE                          0.49%                 (0.12)%                  5.00%

Gold                                     23.51%                 15.35%                 (1.18)%

XOM                                     14.65%                  19.75%                   6.31%

Commodities                        1.11%                  (21.04)%               (15.54)%

SOURCE: Yahoo Finance, Morningstar.com – As of 8/31/2016

We appreciate your time and will talk to you again soon,

Reggie McFadden, CFA    

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Performance Disclosures

All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. (JPM: Guide to the Markets)

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index (JPM: Guide to the Markets)

The Russell 2000 Growth Index® measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. (JPM: Guide to the Markets)

The Russell 2000 Value Index® measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. (JPM: Guide to the Markets)

The MSCI®EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed markets outside of North America. (JPM: Guide to the Markets)

The Barclays Capital U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indexes that are calculated and reported on a regular basis. (JPM: Guide to the Markets)

The Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities and represents 22 separate commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc. (JPM: Guide to the Markets)

The spot price for gold bullion is determined by market forces in the 24-hour global over-the-counter (OTC) market for gold. The OTC market accounts for most global gold trading, and prices quoted reflect the information available to the market at any given time. (Ishares) 

XOM is the common stock symbol of ExxonMobil Corporation that trades on the exchange