The S&P 500 lost nearly 2.0% in October. However, the biggest downturn was posted by the Russell 2000, which plunged about 5.0%.
We expect markets will remain volatile due to concerns about rising interest rates and elections around the world.
Minutes from the Fed’s September meeting indicate several Committee members are of the opinion that the time is right for another rate hike — at least by the end of the year.
In the U.S., we continue to see a shift away from the dividend-producing and “safety” stocks that were the darlings for the first two quarters of 2016.
According to the first advance estimate of the gross domestic product from the Bureau of Economic Analysis, the third quarter 2016 GDP grew at an annualized rate of 2.9% — exceeding the second quarter GDP growth rate of 1.4%.
U.S. government bond prices fell during October as the yield on 10-year Treasuries closed up 23 basis points month-over-month.
Higher U.S. rate expectations may push up the dollar, further curbing S&P 500 profit growth.
Share buyback activity and dividend growth are slowing and will likely create a headwind for U.S. equity markets.
European and Japanese economies continue to stagnate despite ongoing stimulus. We believe that these economies will experience tepid growth for the remainder of the year.
Our long term outlook for emerging market equities is positive, however, we are cautious in the near term. We need to see stronger global economic growth and improved trade flows for us to become more positive.
Despite historically low yields in the U.S., we expect bond returns in the U.S. to be more attractive relative to the rest of the world. Globally, there is over $12 trillion in foreign sovereign debt yielding less than 0%.
- This information has been compiled using data and other statements of fact derived from sources which we believe to be accurate and reliable. However, such data and other statements of fact have not been verified by us, and we do not make any representations as to their accuracy or completeness. Any opinion expressed herein reflects our judgment at this date and is subject to change.