Performance for Week Ending 2/26/2016:
The Dow Jones Industrial Average (Dow) gained 1.51%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) added 1.74%, the Standard & Poor’s 500 Index (S&P 500) tacked on 1.58% and the Nasdaq Composite Index (NASDAQ) surged 1.91%. Sector breadth was positive with 9 of the 10 S&P sector groups finishing higher. The Materials sector (+3.07%) led the way higher followed by Consumer Discretionary (+2.83%) and Industrials (+2.02%).
||Closing Price 2/26/2016
||Percentage Change for Week Ending 2/26/2016
||Year-to-Date Percentage Change Through 2/26/2016
*See below for Index Definitions
MARKET OBSERVATIONS: 2/22/16 – 2/26/16
The major market indices finished the week solidly higher reflecting a firming in oil prices, a batch of favorable economic reports and a better tone to trading in the global markets. Since the market troughed intraday on February 11 the S&P 500 has added 7.6%. The rebound appears to be a combination US economic resilience, the improvement in oil prices, elevated levels of investor pessimism (a contrarian indicator) and the growing likelihood that interest rate policy will remain supportive of risk assets for the foreseeable future.
Despite the rocky start to the year, we remain cautiously optimistic on the intermediate term outlook. While there certainly remains the potential for additional downside risk in the markets, 2016 should shape up to be a better year than 2015.
As the Consumer Goes, so Goes the Economy: The US economy is primarily (about two-thirds) driven by consumer spending. While the manufacturing side of the economy has been experiencing some weakness recently, the consumer side remains in relatively good shape. Consumers continue to benefit from the recovery in the labor markets, an acceleration in wage growth, low gasoline prices, and the uptick in home prices (wealth effect). Confidence among consumers has underscored by the recent uptick in retail sales as well as the ongoing strength in both auto and home sales. In general, a person would not likely buy a new home or car if they thought the economy was going to take a turn for the worst or thought their job was in jeopardy. While the manufacturing sector has faced considerable headwinds, there have been some signs that things may be starting to improve. Industrial production in January jumped by the most since July of last year, January durable goods orders rose by the most in 10 months, and the forward looking ‘new orders’ component of the Institute for Supply Management’s January manufacturing index returned to expansion territory, suggesting better times may lie ahead.
Market Technicals: Technicals were also in play last week as both the Dow and the S&P 500 managed to finish above their 50-day moving averages for the first time this year. Traders watch the “50” closely as it often signals a near term change in the markets direction. While many portfolio managers shrug off the use of technical analysis and consider the practice the equivalent of “market voodoo,” traders tend to use technicals to help shape and define risk. Remember if enough eyeballs are focused on something then that something becomes important – stay tuned.
The Week Ahead: The data calendar will be jam pack during the coming week with the focal point being Friday’s monthly payroll report. According to Bloomberg data, the economy is forecast to add 188K nonfarm jobs and the unemployment rate is expected to hang steady at 4.9%. Wages are expected to tick modestly higher and the average work week is estimated to remain at 34.6 hours. Other economic reports of interest include January pending home sales, the February ISM manufacturing index, January construction spending, the release of the Fed’s Beige Book, and the ISM’s February non-manufacturing (services). Earnings season continues to wind down with only 13 members of the S&P 500 scheduled to release results. On the Fed front, the NY Fed’s Dudley speaks on Monday, San Francisco Fed president John Williams will speak on Wednesday and Dallas Fed president Kaplan will speak on both Thursday and Friday. The US presidential race will also be in the limelight on Tuesday when the “Super Tuesday” primaries and caucuses are held in 13 states and territories. About half the delegates needed to win the Republican nomination are at stake, along with about a third of those required for the Democrat nod.
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 guarantees 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.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
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*Assets under management is as of 09.30.2018 and includes leverage of $11.8bn.
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 Corporate Funding, LLC, Guggenheim Partners Europe Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
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