Sources: Equity Market and Fixed Income returns are from JP Morgan as of 12/09/16. REIT, Rates and Economic Calendar Data from Bloomberg as of 12/12/16.
U.S. Small Cap stocks1 led the way last week with gains of 5.6% followed by Mid2 and Large3 Cap companies which saw equally impressive gains 3.5% and 3.1% respectively. International markets also exhibited positive returns with developed4 and emerging5 stock markets increasing by 2.9% each. When considering “styles”, value stocks have been the clear winner thus far in 2016 with year-to-date gains that have significantly outpaced their growth counterparts. For example, U.S. Large Cap value6 stocks are up 18.4% this year versus an 8.1% gain for U.S. Large Cap growth7 stocks. The most dramatic difference, however, is in the U.S. Small Cap category where value8 companies have seen a 34.2% appreciation compared to the 14% gain in U.S. Small Cap growth9 stocks.
Gains in stock prices this past week came ahead of the Federal Reserve’s December 13-14 meetings where a 0.25% rate increase is now considered a near certainty. Marginally higher interest rates are unlikely to have an immediate impact on economic growth but special attention must be paid to the future guidance presented after the FOMC meeting and the suggested pace of additional rate hikes. In addition to tighter monetary policy in 2017, the widely discussed plans for fiscal stimulus, corporate tax reform, and regulation overhauls all deserve attention as well.
Heading into the final few weeks of the year, institutional investors typically rebalance their holdings, harvest certain unrealized gains or losses, and reposition for the start of the New Year. This can induce volatility as well as a “Santa Claus” rally which appears to be taking hold so far this month. As of Friday’s close, the S&P 500 Index was up just under 3% for the month thus far. Investors should make sure that they have the proper diversification in place to take advantage of the run U.S. stocks have offered this year. This exposure, however, should be balanced with the proper overall mix of asset classes in order to achieve longer term financial goals.
The following indexes were used to represent asset class returns: 1Small Cap stocks – Russell 2000 Index. 2Mid cap stocks- Russell Mid cap Index. 3Large cap stocks- S&P 500 Index. 4 Developed markets – MSCI EAFE Index. 5 Emerging Markets – MSCI EM Index. 6Large cap value- Russell 1000 Value. 7Large cap growth- Russell 1000 Growth Index. 8Small cap value- Russell 2000 value. 9Small cap growth – Russell 2000 Growth Index.
Important Information and Disclaimers
Disclosures: Hennion & Walsh is the sponsor of SmartTrust® Unit Investment Trusts (UITs). For more information on SmartTrust® UITs, please visit www.smarttrustuit.com. The overview above is for informational purposes and is not an offer to sell or a solicitation of an offer to buy any SmartTrust® UITs. Investors should consider the Trust’s investment objective, risks, charges and expenses carefully before investing. The prospectus contains this and other information relevant to an investment in the Trust and investors should read the prospectus carefully before they invest.
Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.
There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions. Distributions from REIT investments are taxed at the owner’s tax bracket.
The prices of small company and mid cap stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.
Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity.
Products that invest in commodities may employ more complex strategies which may expose investors to additional risks.
Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity. Bond Prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the value of your investment.
MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.
MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.
Russell 3000: The Russell 3000 measures the performance of the 3000 largest US companies based on total market capitalization and represents about 98% of the investible US Equity market.
ML BOFA US Corp Mstr [Merill Lynch US Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire US corporate bond market over time.
ML Muni Master [Merill Lynch US Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.
Investors cannot directly purchase any index.
LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.
The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITSs that primarily own and operate income-producing real estate.