Market Recap – A Shaky Week For Emerging Markets

in Market Commentary by

Market Digest – Week Ending 12/11

Stocks fell this week, pushing the S&P 500 back into negative territory for the year. Emerging markets once again fared worst. Brent crude finished the week below $38 for the first time since 2009, down 12% for the week. A freeze of withdrawals from a prominent high yield bond fund sparked panic in the junk bond market, sending major high yield bond ETFs down over 2% on Friday. The highly anticipated December Fed meeting and an expected accompanying interest rate hike is next Wednesday. Dow Chemical and DuPont agreed to merge.

Weekly Returns:
S&P 500: 2,012 (-3.8%)
FTSE All-World ex-US: (-4.9%)
US 10 Year Treasury Yield: 2.13% (-0.14%)
Gold: $1,074 (-1.2%)
USD/EUR: $1.099 (+1.0%)

Major Events:
• Monday – Keurig Green Mountain agreed to be taken private for $14 billion, a 78% premium.
• Monday – Chipotle shares resumed E.Coli fueled declines after a report that some Boston College students became sick after eating there.
• Tuesday – Yahoo announced it is weighing a sale of its core internet business and will not sell its stake in Alibaba. The news was considered a defeat for CEO Marissa Mayer, who welcomed twins this week.
• Wednesday – The Bloomberg Commodity Index fell to its lowest level since June, 1999.
• Thursday – Third Avenue froze redemptions from a credit mutual fund, sparking fear in the high yield part of the market.
• Friday – Dow Chemical and DuPont, the country’s two largest chemicals companies, agreed to merge into a company that will be worth an estimated $130 billion.
• The South African rand capped a 10% decline this week after the finance minister was unexpectedly fired.

Our take:
2015 is shaping up to be a disappointing year for investors. Not an especially painful year like 2000 or 2008, but disappointing even so. In the US, things aren’t so bad. The S&P 500 is now roughly flat for the year, though small cap stocks are down about 5%. The US Aggregate bond market is also flat. From there, things get worse. International Developed stocks are down about 7%, International Bonds are down about 8% and commodities have suffered one of their worst years ever. The Bloomberg Commodity Index is down about 25% and oil is down 35%.

After the last six years of strong positive returns for diversified portfolios, all this can feel pretty disappointing. Small down years are more likely than other years to be followed by big down years. But the next year is still up more often than down. We don’t think there is much to read into. The best chance for success is staying invested and periodically buying more of the asset classes that go down the most.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
Craig Birk, CFP®

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