Monthly Economic Update October 2015


October Summary
Following a rough third quarter, investment markets came roaring back with stunning gains in October. By Halloween, diminished fears drove U.S. stocks within reach of a new all time high. It was the best month for domestic equities in four years! International markets followed suit, with global averages rising by mid to high single digit percentage rates— comparable to gains in the U.S.

Considering the predominantly weak global economic landscape changed little in October, the driver behind worldwide gains in risk assets was global central bank activity. China’s central bank lowered banking reserve requirements and cut interest rates, a combination rarely used. The European Central Bank all but telegraphed a December ramp up in its own monetary stimulus program, and the U.S. Federal Reserve once again postponed its desire to gradually normalize monetary policy. Japan, the only major economy to avoid central bank action, or the threat of action, did so only due to worries of overstimulation. Considering the nation’s central bank balance sheet is now up to 70% of GDP (nearly triple those of the Fed and ECB on a relative basis), that’s not hard to understand. Market moves aside, economic challenges have mounted. China’s growth, already believed to be grossly overstated, has slowed and will likely continue to do so. Japan’s economic initiatives have fallen flat, European prices have gone down, and earnings and revenue for U.S. companies have fallen for two quarters in a row. That means domestic valuations are stretched. Standing atop central bank shoulders to keep one’s head above murky economic waters seems an increasingly slippery proposition.

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October’s Economic Releases

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Market Returns

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Disclaimers
This commentary was written by Robert W. Lamberti, CFA, Vice President of Investments and a Principal of Summit Financial Resources, Inc. Source of performance: Morningstar®. Indices are unmanaged and cannot be invested into directly. The investment and market data contained in this newsletter is not an offer to sell or purchase any security or commodity. Standard & Poor’s 500 Index (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The MSCI EAFE and Emerging Markets Indexes were created by Morgan Stanley Capital International (MSCI) and designed to measure equity market performance in global developed and emerging markets, respectively. The Barclays Aggregate Bond Index is a market capitalization-weighted index comprised of government securities, mortgage-backed securities, asset-backed securities, corporate securities, and a small number of foreign bonds traded in the U.S. It is used to represent the universe of bonds in the domestic market. REITs, Real Estate Investment Trusts, are securities that invest in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, however, may have liquidity constraints. Past performance does not guarantee future results. Information throughout this Newsletter, whether stock quotes, charts, articles, or any other statement or statements regarding markets or other financial information, are obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the reader. To unsubscribe from this investment newsletter please reply to this email with “unsubscribe” in the subject. Opinions expressed are subject to change without notice and are not intended as investment advice or a guarantee of future performance. Consult your financial professional before making any investment decision. Securities and Investment Advisory Services offered through Summit Equities, Inc. Member FINRA/SIPC, and Financial Planning Services offered through Summit Equities, Inc.’s affiliate Summit Financial Resources, Inc. 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600, Fax: 973-285-3666.

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