Headwinds Continue to Fade

The major market indices finished the week higher with the S&P 500 advancing for a fifth straight week. The S&P finished the month up over 8%, the best monthly performance since October 2011 when stocks gained 10.8%. Driving the gains was clarity on Fed policy, the budget resolution in Washington and solid third quarter earnings trends.

November 02, 2015    |    By Mike Schwager

Performance for Week Ending 10/30/15:

The Dow Jones Industrial Average (Dow) rose 0.10%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) added 0.15%, the Standard & Poor’s 500 Index (S&P 500) gained 0.2% and the Nasdaq Composite Index (NASDAQ) tacked on 0.43%. Sector breadth was mixed with 4 of the S&P sector groups finishing higher and 6 closing lower. The Healthcare sector (+3.06%) was the best performer while the Utilities (-1.94%) was the worst.

Index* Closing Price 10/30/2015 Percentage Change for Week Ending 10/30/2015 Year-to-Date Percentage Change Through 10/30/2015





Wilshire 5000




S&P 500








*See below for Index Definitions

MARKET OBSERVATIONS: 10/26/15 – 10/30/15

The major market indices finished the week higher with the S&P 500 advancing for a fifth straight week. The S&P finished the month up over 8%, the best monthly performance since October 2011 when stocks gained 10.8%. Driving the gains was clarity on Fed policy, the budget resolution in Washington and solid third quarter earnings trends. The October rally was global in nature with almost all of the major international indices up solidly. Hints of additional easing from the European Central Bank and a surprise rate cut in China helped fuel the global gains.

Markets are now set to enter into the “Best Six Months” period. According to the Stock Trader’s Almanac, since 1950 the Dow Jones Industrial Average has gained an average 7.6% from November through April versus an average increase of 0.3% for the blue-chip index from May through October.

Fed Meeting:
As expected, the FOMC meeting concluded with no change to interest rate policy, although the after meeting statement did take on a slightly “hawkish” tone. The committee noted that the economy is still expanding at a “moderate” pace, suggesting the option of a December move is still on the table. The following line from the statement also seemed to underscore that December will in fact be a “live” meeting: “In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress—both realized and expected—toward its objectives of maximum employment and 2 percent inflation.” While the statement was far from a commitment to move at the next meeting, it certainly can’t be ruled out either.

After staging a ‘trap-door’ selloff following the release of the statement, markets found their footing and powered higher. Ultimately higher rates would signal improvement in the domestic economy and fading worries over the health of international markets. Uncertainty surrounding the timing of the initial lift-off in rates has been a substantial headwind to the markets and clarity on the timing and assurance that the path forward will be very gradual has almost become a prerequisite for the market to make a sustainable move higher. The longer the Fed waits, the more the market will question the economy’s underlying vigor. In addition, the longer they wait, the more likely the Fed will have to move more aggressively (vs. the desired gradual approach).

Q3 Earnings Season:
Third quarter earnings season continues to shape up much better than initially feared. Through Friday, 340 members of the S&P have reported results with 73.5% surprising to the upside. For context, the average earnings beat since 2004 has been 66%. Overall reported earnings for the S&P are currently down 2.7%, but still solidly better than the 5%-plus decline expected at the start of earnings season. When the Energy sector, which has been blasted due to the plunge in oil prices, is excluded—S&P earnings are actually up 4.1%. Expectations heading into the quarter were muted due to global growth concerns and the lingering impact of the strong dollar and weaker energy prices. With the bar set so low, the better results are hardly surprising.

The Week Ahead:
It will be another very busy week for earnings with 105 members of the S&P 500 scheduled to report results. Included in this group are Dow components Visa and Walt Disney Company. It will also be a busy week on the data front with the focal report being Friday payroll data. According to Bloomberg, nonfarm payrolls are estimated to rise 180K while the unemployment rate is expected to hang steady at 5.1%. Other reports of interest include; the ISM manufacturing index, construction spending, factory orders, ADP employment report, third-quarter productivity, and weekly jobless claims. The Fed speaking calendar will be active this week with at least a dozen events scheduled including Fed Chair Yellen’s testimony to the House Financial Services Committee on Wednesday.


The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

Indices do not include any expenses, fees, or sales charges, which would lower performance. Indices are unmanaged and should not be considered an investment. It is not possible to invest directly in an index.

The individual companies mentioned in this piece were for informational purposes only and should not be viewed as recommendations.

The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. This document contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no gua rantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Information in this report does not pertain to any investment product and is not a solicitation for any product. This material has been prepared using sources of information generally believed to be reliable. No representation can be made as to its accuracy.

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.

Investing involves risk, including the possible loss of principal.

Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.

© Guggenheim Investments. All rights reserved.

Research our firm with FINRA Broker Check.

• Not FDIC Insured • No Bank Guarantee • May Lose Value

This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.