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Weekly Market Snapshot

September 14, 2018

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

There were several important economic data releases, but none of the reported seemed to matter much for the financial markets. August inflation figures were a bit lower than anticipated, but not enough to alter Fed rate hike odds (about 98% for a September 26 hike, around 83% for a December 19 follow-up move). Retail sales edged up 0.1% and ex-autos manufacturing output was flat in August, but retail sales and industrial production figures for June and July were revised higher – consistent with moderate growth in the overall economy. The quit rate (an indicator of labor market optimism) rose to the highest level since early 2001. The UM Consumer Sentiment index rose. The Index of Small Business Optimism hit a record high.

There was little news on the trade policy front, but markets continued to bounce between optimism and pessimism that trade conflicts can be settled. The federal budget deficit widened sharply in August (relative to a year earlier), but that partly reflected a calendar quirk (September 1 fell on a weekend, shifting some spending into August).

Next week, the economic data are unlikely to shift the overall picture much. We could get some news on trade (Chinese negotiators will arrive in Washington later in the week), but unless we get some solid news (an agreement reached or a White House escalation of tariffs), market reaction should be limited. The Fed is now in a quiet period ahead of the upcoming monetary policy meeting.


Indices

  Last Last Week YTD return %
DJIA 26145.99 25995.87 5.77%
NASDAQ 8013.71 7922.73 16.08%
S&P 500 2904.18 2878.05 8.62%
MSCI EAFE 1929.86 1914.37 -5.90%
Russell 2000 1714.32 1714.47 11.64%

Consumer Money Rates

  Last 1 year ago
Prime Rate 5.00 4.25
Fed Funds 1.91 1.16
30-year mortgage 4.71 3.95

Currencies

  Last 1 year ago
Dollars per British Pound 1.311 1.340
Dollars per Euro 1.169 1.192
Japanese Yen per Dollar 111.92 110.24
Canadian Dollars per Dollar 1.300 1.217
Mexican Peso per Dollar 18.833 17.666

Commodities

  Last 1 year ago
Crude Oil 68.59 49.89
Gold 1208.20 1329.30

Bond Rates

  Last 1 month ago
2-year treasury 2.75 2.61
10-year treasury 2.97 2.85
10-year municipal (TEY) 3.92 3.80

Treasury Yield Curve – 09/14/2018

Chart

As of close of business 09/13/2018


S&P Sector Performance (YTD) – 09/14/2018


Chart

As of close of business 09/13/2018


Economic Calendar

September 18  —  Homebuilder Sentiment (September)
September 19  —  Building Permits, Housing Starts (August)
 —  Current Account Deficit (2Q18)
September 20  —  Jobless Claims (week ending September 15)
 —  Existing Home Sales (August)
 —  Leading Economic Indicators (August)
September 25  —  CB Consumer Confidence (September)
September 26  —  New Home Sales (August)
 —  Fed Policy Decision (Powell press conference)
September 27  —  Real GDP (2Q18, 3rd estimate)
 —  Durable Goods Orders (August)
October 5  —  Employment Report (September)
October 5  —  Employment Report (September)
October 8  —  Columbus Day Holiday (bond market closed)
November 6  —  Election Day

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business September 13, 2018.

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