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Market Recap – US Stocks Up For The Week

Market Digest – Week Ending 2/26

US stocks gained for the week, pushing back into positive territory for the month. Emerging markets stocks were down modestly as investors continue to attempt to understand the impact of lower oil prices and decelerating growth in China. Oil prices moved higher, but it seemed to be based more on trading and fast money than any fundamental reason.

Weekly Returns:

S&P 500: 1,948 (+1.57%)
FTSE All-World ex-US: (+0.0%)
US 10 Year Treasury Yield: 1.76% (+0.01%)
Gold: $1,222 (-0.4%)
USD/EUR: $1.093 (-1.8%)

Major Events:

• Monday – The International Energy Agency said oil prices are unlikely to significantly rebound for at least a few years.
• Monday – The British Pound sank to a seven year low against the dollar after popular London mayor Boris Johnson said he favored an exit from the European Union.
• Tuesday – Saudi Arabia’s oil minister said the country would not reduce supply.
• Tuesday – Time Inc., publisher of Sports Illustrated, People and Time, was said to be exploring a bid for Yahoo’s core internet business.
• Wednesday – US bank stocks fell as fear grew around lower interest rates for longer and possible defaults in the energy sector. The KBW Nasdaq Bank index nearly reached a 20% decline for the year.
• Wednesday – New single family home sales unexpectedly declined 9% in January.
• Thursday – MetLife is preparing to sell a network of 4,000 sales agents to Mass Mutual.
• Thursday – Qatar’s energy minister, and current president of OPEC, said a production freeze at current levels would help stabilize prices at higher levels.
• Friday – A Chinese Central Bank official said he sees no reason for the currency to fall persistently and that the country has no plans to use competitive devaluation.
• Friday – Iranians began voting for parliament in the first election since the nuclear deal reached in July.
• Friday – Q4 US GDP growth was unexpectedly revised upward to 1.0%, from 0.7%.

Our take:

Super Tuesday is next week. By the time it is over we may have a good idea who the nominees for President will be. Historically, the market cares less about which party or which candidate wins than most would imagine, and that is likely to be true again this time around. But it seems likely that the 2016 contest will be even more polarizing than usual and many voters/investors have strong feelings. If so, it could support market volatility remaining elevated throughout the year.

We like to point out that volatility can include either the fun kind or the unpleasant kind, so we don’t think the elections are a reason to start market-timing or to change your long term allocation – especially if you have emotional feelings one way or the other. But now that the market tranquility from 2014 and 2015 has been shaken up we expect volatility to remain elevated. It is worth noting that the S&P 500 is now “only” down about 5% for the year. However, individual stock volatility has spiked and many single companies are down over 25%. The market is very unkind these days to any kind of earnings or news event letdowns. If you have concentrated positions that have held up well it may be a good time to consider how much confidence you have and how you would feel if one of your holdings is next to be hit.

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