Investment Commentary – November 24th, 2015
Market Indices as of Market Close November 23rd, 2015
Dow 17,793 (-0.17% YTD)
S&P 2,086 (1.34% YTD)
NASDAQ 5,102 (7.74% YTD)
Global Dow 2,399 (52 week low 2,203/high 2,644)
10-year Treasury 2.21 % (52 week low 1.64/high 2.50)
Gold 1,079 (52 week low $1,062/high $1,306)
Oil 39.97 (52 week low $39.97/high $76.60)
Cheering, Not Fearing, a Rate Hike?
Last week, investors once again focused on central bank policy.
The twist is that investors celebrated the potential for more divergence: tightening by the Federal Reserve (Fed) while the European Central Bank (ECB) pursues easing.
Investors now appear to be treating a December rate hike by the Fed as a sign of economic stability rather than something to be feared.
In Europe, the story remains somewhat different. European equity markets also rallied, but the catalyst continues to be hope for more monetary stimulus, rather than signs of economic recovery.
The implications for investor positioning: We would suggest a continued overweight to hedged European equities while in the U.S. adopting a modest tilt toward large- and mega-cap stocks.
A Rally with a Twist
Stocks rallied last week, recouping most of the previous week’s losses. The tech-heavy Nasdaq Composite Index led the pack, gaining 3.59% to close the week at 5,104, while the Dow Jones Industrial Average rose 3.35% to 17,823 and the S&P 500 Index climbed 3.26% to 2,089. Meanwhile, the yield on the 10-year Treasury slipped from 2.28% to 2.26%, as its price rose.
Last week, investors looked past the tragic attacks in Paris and once again focused on central bank policy. The twist is that investors celebrated the potential for more divergence: tightening by the Federal Reserve (Fed) while the European Central Bank (ECB) pursues easing. Both trends have implications for investor positioning. We would suggest a continued overweight to hedged European equities while in the U.S. adopting a modest tilt toward large- and mega-cap stocks.
How is the stock market affected by Thanksgiving and Black Friday?
Black Friday – the name given to the first day after Thanksgiving – has become one of the most important retail and spending events in the United States. Every holiday season, prognosticators make predictions about the level of sales on Black Friday, and investor confidence may be affected by whether or not those expectations are met.
If consumers follow up Thanksgiving by spending a lot of money on Black Friday – and retailers show strong numbers – then investors might have their first indication that it is shaping up to be a particularly profitable shopping season. This confidence is reflected in the stock market. In this way, Black Friday could be considered a leading indicator for the markets.
Black Friday is so-dubbed because this is the shopping day on which many retailers have traditionally made enough sales to put them in the black for the year. “In the black” is a bit of accounting terminology that indicates profitability; losses are recorded in red, and profits are recorded in black.
Since many retailers consider Black Friday to be crucial to their business’s annual performance, investors look at Black Friday sales numbers as a way to gauge the overall health of the entire retail industry. Economists, based on the Keynesian assumption that spending drives economic activity, view lower Black Friday numbers as an indication of slowed growth.
The stock market can be affected by having extra days off for Thanksgiving or Christmas. The markets tend to see increased trading the day before a holiday or a long weekend, a phenomenon known as the holiday effect. Many traders look to capitalize on these seasonal effects.
We are thankful for the opportunity to serve your financial investment needs. Happy Thanksgiving!
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
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