Monthly Economic Update October 2016


Monthly Summary
October returns were a downer for a year otherwise proving quite favorable for investors. The key drivers behind losses in nearly every major asset class came in three flavors: growth, monetary policy, and politics.

Years of consistent, albeit tepid, economic growth have started to bring inflation back to life. Far from hyperinflation, or even central bank targets, just the hint of rising inflation caused investors to reassess asset valuations. Interest rate sensitive assets, such as real estate, were hammered. Developed market stocks declined worldwide, and it was the worst month for global bonds in six years.

Monetary policy was a headwind as well. Favorable U.S. growth and rising inflation expectations have increased the probability of the Federal Reserve raising rates by year-end. Higher interest rates are less supportive to investment valuations. As for international central banks, the limitations and risks of their policies are becoming more apparent. They are also increasingly willing to allow their economies to temporarily run “hot.” Policy limitations and the potential for higher inflation acted as a one-two punch on investors and their portfolios.

Lastly, investors were unsettled by new developments in the U.S. presidential race. The resulting shift in election dynamics, days before the election, was not well received by investment markets. Volatility rose and asset prices declined.

Economic Data

monthly-11-7-16-1

monthly-11-7-16-2

Market Returns

monthly-11-7-16-3

Disclaimers

This commentary was written by Robert W. Lamberti, CFA, VP and Co-CIO of Summit Equities, Inc. and Summit Financial Resources, Inc. Source of performance: Morningstar®. Indices are unmanaged and cannot be invested into directly. The investment and market data in this newsletter is not an offer to sell or purchase any security or commodity. Past performance does not guarantee future results. The Barclays Capital U.S. Aggregate Bond Index is a market capitalization-weighted index comprising Treasury securities, Government agency, mortgage backed, corporate, and some foreign bonds traded in the U.S. The Barclays Capital Municipal Bond Index covers the U.S. dollar-denominated long-term tax exempt bond market. The Barclays Capital Global Aggregate ex. U.S. Bond Index measures the performance of global investment grade fixed-rate debt markets excluding USD-dominated securities. The Bloomberg Commodity Index measures the performance of the commodity sector representing an unleveraged, long-only investment in commodity futures. The Dow Jones U.S. Real Estate Index measures the performance of the real estate sector of the U.S. equity market, including real estate holding and development companies and Real Estate Investment Trusts. The Wilshire 5000 Total Market Index measures the performance of all U.S. headquartered equities with readily available price data. It is market capitalization-weighted and is designed to track the overall performance of the U.S. stock markets. The S&P 500 Index is a market capitalization-weighted Index of 500 widely held stocks often used as a proxy for the stock market. The Russell 2000 Index measures the performance of the small cap segment of the U.S. equity universe. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure the performance of developed markets, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index designed to measure global emerging markets performance. Information throughout this Newsletter or any other statement(s) 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.

Download PDF