Weekly Capital Markets Update

Market Overview

Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morngan as of 11/30/18. Rates and Economic Calendar Data from Bloomberg as of 12/03/18. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.

Happening Now                   

Global equity markets came storming back last week following a very disappointing shortened trading week. In fact, the Dow Jones Industrial average advanced 5.32% and the NASDAQ Composite gained 5.66%, both representing a nearly 10% week to week swing. Elsewhere in the U.S., the S&P 500 Index was up 4.91% and the Russell 2000 Index, a measure of the Nation’s smaller companies, gained 3.04%. Global equity markets were also positive, led by an advance of 2.65% by emerging markets followed by a developed markets advance of 0.97%. In fixed income, the 10-year Treasury yield dipped below 3% for the first time since September before settling in at 3.01% to close the week.

It was a promising start to the week as investors saw strength in retail and technology stocks. However, it was Fed Chairman Jerome Powell’s comments on Wednesday that really propelled stocks higher and gave the market a bit of a sigh of relief. Powell suggested that interest rates are “just below” a level considered neutral. This is a fairly stark contrast to his more hawkish tone in October when he said rates were “a long way” from neutral. These October comments caused fixed income yields to jump and certainly contributed to the turmoil equity markets experienced since October. Therefore, one can reasonably understand why this new, more “dovish” tone, pushed markets higher. The Fed will remain data dependent so we’ll still have to wait and see just how dovish or hawkish they will prove to be. At this time, we expect one more rate hike this year following their December meeting as well as one, or possibly two, rate hikes in 2019.

Moving into this week, Friday’s optimistic comments from U.S. Trade Representative Robert Lighthizer on trade discussions with China came to fruition over the weekend as the U.S. and China agreed to continue negotiations and delay tariffs. The major averages climbed as easing geopolitical tensions provided a boost to investor sentiment. These gains are being erased today as investors seem to be questioning if actual progress is being made on these negotiations or is the “can just being kicked down the road” for the next few months?

We will continue to monitor global economic news, data releases, and company earnings to gauge the temperature of this market. On the fixed income front, as you may have heard, on Monday the two and five year Treasury yields inverted. Many investors see this as a red flag and a potential sign of recession ahead. However, as we stressed in last week’s update, a slowdown in economic growth doesn’t necessarily equate to a recession and we look forward to positive, albeit potentially volatile, market returns as we head into 2019.

Finally, we would feel remorse if we did not mention that on Wednesday, December 5, U.S. markets will be closed as the day has been declared a National Day of Mourning for former President George H.W. Bush, who passed away on Friday at the age of 94. President Bush was an accomplished businessman, military man, and statesman. Our sincere condolences go out to the entire Bush family.

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.

Definitions

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 REITs that primarily own and operate income-producing real estate.