Weekly Commentary

For the Week of December 19, 2016

The Markets

The tear Wall Street has been on since the presidential election was interrupted by falling stocks Friday after a Chinese Navy warship seized a U.S. underwater drone in the South China Sea on Thursday. Lower-than-expected revenue for Oracle Corporation, a multinational computer software company, dragged on the S&P and the tech sector. For the week, the Dow rose 0.45 percent to close at 19,843.41. The S&P fell 0.03 percent to finish at 2,258.07, and the NASDAQ lost 0.15 percent to end the week at 5,437.16.

Returns Through 12/16/16
1 Week
YTD
1 Year
3 Year
5 Year
Dow Jones Industrials (TR)
0.45
16.96
14.84
10.42
13.68
NASDAQ Composite (PR)
-0.15
8.56
7.20
10.50
16.30
S&P 500 (TR)
-0.03
12.84
11.34
10.43
15.56
Barclays US Agg Bond (TR)
-0.61
1.52
1.65
2.58
2.03
MSCI EAFE (TR)
-0.55
0.01
1.41
-0.42
5.97

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

The Doctor Will Be in Shortly — Healthcare spending in the United States reached $3.2 trillion in 2015 (18 percent of the nation’s economy), equal to spending $9,990 per person. In 1995, 20 years earlier, per person healthcare spending in America was $3,788 (source: Health Affairs, BTN Research). 

End of Life — Total Medicare spending in fiscal year 2016 was $595 billion. Of that total, 25 percent ($150 billion) was spent during beneficiaries’ final 12 months of life (source: Medicare, BTN Research). 

Employment Situation — U.S. employers added 178,000 new net jobs during November, bringing the YTD total to 1.982 million new net jobs, an average of 180,000 per month. Our country’s 145.1 million employees are split 85/15 between the private sector (i.e., non-government workers) and the public sector (i.e., government workers) (source: Department of Labor, BTN Research).

WEEKLY FOCUS – Looking Back on 2016

As the Jan. 11, 2016, Weekly Market Commentary (WMC) reported, the Dow Jones Industrial closed at 16,346.45 on Friday, Jan. 8. That week’s focus article, titled “Staying on Course in a Choppy Sea,” discussed the current market volatility attributed to China’s economic challenges, a slowing global economy and a sustained slide in oil prices. By April 22, the Dow had increased over 1,600 points to close at 18,003.75.

A few months later, Wall Street reacted negatively when Britain voted to leave the European Union, but stocks were back up in a few days. At the end of August, investors seemed jittery about a possible interest rate hike and then responded positively when the Federal Reserve decided to leave rates alone in September.

Throughout a highly contentious presidential campaign, emotions ran high. Famous investors made dramatic predictions. Mark Cuban, billionaire owner of the Dallas Mavericks, forecast stocks would plunge if Donald Trump was elected president. While Swiss investment advisor Marc Faber claimed Hillary Clinton would cripple the economy by hiking taxes by $1 trillion if she was elected.

Following the election, our Nov. 14 WMC opened: “Although analysts had predicted a 5 to 10 percent drop if Donald Trump won the election, the market bounced last week. The Dow Jones finished its best week since 2011, and the S&P 500 realized its strongest weekly gain in two years. For the week, the Dow rose 5.52 percent to close at 18,847.66.”

Last Wednesday, the Federal Reserve announced its second interest rate increase in more than 10 years, and the markets rose. In November, the Dow broke the 19,000 barrier for the first time. Earlier this month, it came close to breaking 20,000.

Historically, the market’s long-term trends haven’t been affected by which party holds the White House. Elections often have some short-term effects. Financial strategist Jeff Gundlach points out stocks typically rise following a presidential election and often drop after the new president is sworn in, when investors realize the president doesn’t really have a magic wand.

Although bull markets usually run around 4½ years, our current bull market is more than seven year years old. The only thing we can know for sure about Wall Street’s performance is that it’s uncertain, but past market data indicates the longer you have money invested, the less volatility your portfolio experiences. If your current situation or long-term goals have changed, please call our office.

 

This commentary brought to you by J. Graydon Coghlan, CRPC
and the team at CFG Wealth Management, Inc.
4370 La Jolla Village Drive, Suite 630 San Diego, CA 92122
Phone: (858) ­550-3960 Fax: (858) ­550-3969 Toll Free: (800) ­884-5121

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI# 1666329.1

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