January 28 2016
Investors breathed a sigh of relief last week when U.S. stock markets recovered from a tumble toward bear market territory with the grace of a Cirque du Soleil performer. Many stock markets around the world finished the week with gains, although national indices in Europe and the United States fared better, generally, than those in Asia.
BloombergBusiness reported global stocks experienced their biggest gains in more than three years, while safe haven markets, including Treasuries, retreated*. Stocks moved higher on speculation the European Central Bank (ECB) will expand stimulus measures, the U.S. Federal Reserve may revise its rate hike intentions, and Japan and Asia also may take steps to support their markets. According to the Financial Times:
“Sentiment turned in part because of dovish comments on Thursday from Mario Draghi, president of the European Central Bank, which many in the market viewed as signaling that further stimulus measures could be unveiled in March…The slide in U.S. equity markets and strengthening of the U.S. dollar have rapidly unraveled investor expectations that the Fed will be able to lift rates four times this year, as the central bank seeks to normalize policy. Instead, traders put the odds on just one rate rise this year.”
A late-week rally in oil prices also helped push stock markets higher. The Financial Times reported crude oil hit a 12-year low midweek and then bounced more than 18 percent. While improving oil prices proved heartening to investors, Barron’s pointed out prices have dropped because supply expanded ahead of demand. With growth in China slowing, it may take some time for supply and demand to balance.
*US treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit and market risk.
- Data as of 1/22/161-WeekY-T-D1-Year3-Year5-Year10-Year
- Standard & Poor’s 500 (Domestic Stocks)0.014-0.067-0.0760.0620.0810.042
- Dow Jones Global ex-U.S.0.3-9-15.4-4.1-3.1-0.7
- 10-year Treasury Note (Yield Only)2.1NA188.8.131.52.4
- Gold (per ounce)0.23.2-15.4-13.4-47.1
- Bloomberg Commodity Index2.4-4.2-25.9-19.1-14.1-7.8
- DJ Equity All REIT Total Return Index1.3-4.4-9.17.410.46.4
*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association
*S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.