December 2015 - Market Update
- The Dow Jones Industrial Average returned 0.71% in November. The NASDAQ Composite gained 1.28%.
- The S&P 500 finished November about 50 points, or 2.3%, below its May 21, 2015 all-time high of 2,130.
- As West Texas Intermediate (WTI) crude oil prices fell by $5 to $41.65/barrel in November, U.S. auto sales head to record highs, with an expected annualized sales pace of 18.2 million vehicles last month.
U.S. stocks ended November with small gains, extending a fourth quarter rally into a second month. The benchmark index finished slightly lower on November’s Cyber-Monday month-end session, trimming its monthly gain, as investors reviewed lackluster traffic and sales data in traditional “brick-and-mortar” stores, while online retailers captured the majority of sales. Even so, the 2015 Holiday shopping season is expected to be the best since before the 2008 financial crisis. Equities have benefited from continuing signs of overall economic recovery, while also being challenged by an impending U.S. Federal Reserve interest rate hike, perhaps as early as mid-December. On November 24, the U.S. Bureau of Economic Analysis upwardly revised its estimate for third quarter GDP growth to 2.1% from 1.5%. A third and final GDP figure is scheduled for release on December 22. Global market jitters surrounding the looming U.S. rate hike were assuaged after minutes from the Federal Open Market Committee (FOMC) policy meeting revealed that subsequent rate hikes will be “shallow and gradual.”
Just four of the ten major sector groups advanced in November, led by Financials (+1.89%), Industrials (+0.93%) and Technology (+0.87%). Materials (+0.83%) gained the least, while Utilities (-2.14%) and Telecom (-1.26%) fell the most among decliners. Year-to-date (YTD), Consumer Discretionary (+13.26%) and Technology (+8.41%) remain this year’s top performers. Hurt by sagging oil prices, Energy (-12.48%) remains this year’s worst performing sector.
Small-cap stocks, as measured by the Russell 2000 Index, jumped 3.25% in November, widely outperforming its mid and large-cap counterparts. Mid-cap stocks rose 0.25%, as measured by the Russell Midcap Index. Small and mid-cap stocks both turned positive YTD, rising 0.64% and 0.25% respectively. Value stocks edged out growth in November with the Russell 1000 Value Index up 0.38%, while the Russell 1000 Growth Index gained 0.28%. However, the Russell 1000 Growth Index has extended its strong YTD performance, returning 7.24%, while the Russell 1000 Value Index remains in negative territory, down 1.71% so far this year.
Internationally, the MSCI EAFE Index, a broad measure of 21 global developed markets outside of the U.S. and Canada, fell 1.56% last month, trimming its YTD gain to 0.54%. The MSCI Emerging Markets Index fell nearly 4% last month, giving back more than half of its 7.13% October surge. Emerging market stocks widened their YTD losses to 12.98%.
Treasuries, as measured by the Barclays U.S. Government Bond Index, fell by 0.40% in November and are returning just 1.03% YTD. Given a potential near-term Fed rate hike, Treasury prices fell last month, with the yield on two-year Treasury notes climbing by about 21 basis points in November, their largest monthly gain since December 2009. In contrast, the yield on benchmark 10-year U.S. Treasuries rose just five basis points, ending the month at 2.21%. U.S. investment grade corporate, government and agency-backed bonds, as measured by the Barclays U.S. Aggregate Bond Index, fell 0.26% last month, trimming the YTD return to 0.88%. The Barclays U.S. Corporate High Yield Index, a proxy for below-investment grade corporate bonds, plunged 2.22% in November. The high-yield bond index is now down 2% YTD. The Barclays U.S. Municipal Bond Index rose 0.40% last month, lifting its YTD gain to 2.58%.
This report is created by Tower Square Investment Management LLC
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The Barclays U.S. Aggregate Bond Index, which used to be called the Lehman Aggregate Bond Index, is a broad base index, maintained by Barclays Capital, and it often used to represent investment grade bonds being traded in the U.S. Barclays Capital (BarCap) U.S. Aggregate Bond Index is made up of the Barclays Capital U.S. Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Based Securities Index, including securities that are of investment grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million.
The Barclays U.S. Municipal Bond Index is an unmanaged, market-value-weighted index of investment-grade municipal bonds with maturities of one year or more.
The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt.
The Barclays U.S. Government Bond Index is comprised of the U.S. Treasury and U.S. Agency Indices. The index includes U.S. dollar-denominated, fixed-rate, nominal US Treasuries and US agency debentures (securities issued by US government owned or government sponsored entities, and debt explicitly guaranteed by the US government). The US Government Index is a component of the U.S. Government/Credit and U.S. Aggregate Indices, and eligible securities also contribute to the multi-currency Global Aggregate Index. The U.S. Government Index has an inception date of January 1, 1973.
The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
The MSCI EAFE is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.
MSCI Emerging Markets is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.
The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.
The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.
The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies.
The S&P 500 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 Shanghai Composite Index is a stock market index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange.
The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.