Capital Markets Update – Week of 10/20/2014

Market Overview

Sources: Rates Data and Economic Calendar—Bloomberg Markets as of 10/20/14; Equity Market Returns and Fixed Income and Alternatives Data—Wells Fargo Advisers as of 10/17/14.


Happening Now


Stocks Finish a Wild Week

U.S. Large Cap Stocks finished off a volatile week on Friday with losses for the five day trading period of around 1.00%. The S&P 500 moved by more than 1.25% in two of the five trading days as the VIX (or Volatility Index) increased by 53% for the week,  as of Thursday night’s close, while finishing on Friday with a weekly gain of 13%. Investors overly concentrated in U.S. Blue Chip companies should begin to consider how they can benefit from a strategy that involves diversification to other capitalizations, sectors and styles of the stock market. For example, according to Morningstar, The S&P Mid Cap 400 index gained 1.36% last week, while the Russell 2000 Index which tracks the performance of small cap stocks gained 2.76%, and the Utility (+0.38%), Real Estate (+1.44%), and Industrial (+2.26%) sectors all posted positive returns.

While the stock market often serves as a leading indicator for the overall economy, we believe this most recent weakness in the stock market is an expression of fear caused by the many headlines that have dominated the media recently, including, but not limited to, Ebola and ISIS. Should the Ebola virus fail to find new hosts in the U.S. and concerns begin to dissipate, we may see a rebound in the stock market as the U.S. economy continues to improve heading into the holiday shopping season despite lingering global economic growth concerns overall.


Important Information and Disclaimers

Past Performance is not a guide to future performance.

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.