Market Recap – Dollar Rises Against The Pound And Euro

in Market Commentary by

Market Digest – Week Ending 10/14/2016

Stocks and bonds fell as investors fretted about the likelihood of a Fed rate hike in December and the possible longer term impacts of Brexit. The dollar rose against the British Pound and the Euro. In election news, Trump continued to lose momentum and turned against some prominent members of the Republican Party. Twitter shares fell as it appeared Salesforce will not bid for the company.

Weekly Returns:

S&P 500: 2,133 (-1.0%)
FTSE All-World ex-US: (-1.5%)
US 10 Year Treasury Yield: 1.80% (+0.08%)
Gold: $1,251 (-0.3%)
USD/EUR: $1.097 (-2.1%)

Major Events:

• Monday – Oil rallied about 3% on the news that Russia may join an OPEC deal to limit output.
• Tuesday – GE bought LM Wind Power, a turbine blade maker, for $1.6 billion.
• Wednesday – Fed minutes showed disagreement about when to raise rates but that it expected it to happen “relatively soon”.
• Wednesday – The British Pound hit its lowest level in modern history relative to a basket of other currencies.
• Wednesday – Wells Fargo CEO John Stumpf resigned following continued anger about the opening of millions of accounts without client consent.
• Thursday – Initial jobless claims remained near a 10 year low.
• Thursday – China reported a 10% year over year decline in exports in dollar terms.
• Friday – Donald Trump denied a fresh round of sexual misconduct claims.
• Friday – Aides to Angela Merkel said the state won’t take a stake in Deutsche Bank if it issues new stock to raise capital.

Our take:

After rising to nearly 50% on September 26th, the odds of Donald Trump winning the presidency have dropped below 20% according to several online polls. We presume you know why.

What is interesting is that during his rise from early August to late September, the market was fairly flat. Since his declining numbers, the market is down. When he had a similar drop in appeal in early August, markets were also down.

This is evidence that the market isn’t as concerned about who wins as many individual investors are. At this point, it would be a big surprise if Trump wins and we could expect a knee-jerk reaction down if he does because it would bring greater uncertainty. We don’t have a directional forecast for the remainder of the year, but for those with a longer time horizon we don’t think the election should be a reason to wait on the sidelines and the market seems to be sending the same signals.

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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.

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