Market Overview
Sources: Equity Market, Fixed Income and REIT returns from JP Morgan as of 05/27/16. Rates and Economic Calendar Data from Bloomberg as of 05/31/16.
Happening Now
U.S. stocks come back after Memorial Day Weekend poised to finish May with their second best monthly performance of 2016. The S&P 500 Index, as of Friday, May 27, has gained nearly 2% this month on the back of positive economic data and an increased likelihood of the Federal Reserve (“Fed”) hiking interest rates again in either June or July. On the international front, developed markets have sold off thus far in May with the MSCI EAFE Index down 0.8%. The relatively weaker dollar in 2016 has helped U.S. investors who have allocations to overseas equities. However, speculation over rate increases has led to an appreciation of the greenback in recent weeks. On the emerging market front, the MSCI EM Index lost nearly 3.7% this month but rose back into positive territory for the year following a nearly 3% gain last week.
Although we come back to a shortened trading week, there is a host of economic data due this week that will keep market participants busy. The two most important data points, in terms of potential implications for the Fed’s interest rate decision, are the Personal Consumption Expenditures (PCE), which is due out Tuesday, and the May Employment Situation report which comes out Friday morning. As a reminder, the Federal Reserve operates under a “dual mandate” of stable inflation through stable prices and maximum employment. The PCE is the Fed’s preferred measure of inflation and a release that shows inflation moving closer to their target of two percent will stoke a hawkish market reaction. Continued jobs improvement will address the second mandate the Fed pledges to manage and will further increase the probability for a 25 Basis Point (i.e. 0.25%) rate hike in either June or July.
Some investors abide by the mantra of “Sell in May and Go Away” simply because they are too busy to manage their investments during the volatile summer months. Recognizing that most individual investors would rather spend their summer days enjoying the warm weather and not researching investment strategies, we suggest that anyone tempted to follow this age-old adage consider hiring an experienced portfolio manager, not only for the three month summer period but perhaps for an on-going basis, so as to not miss out on potential gains and/or experience difficulties on determining the ideal time to invest back into the market. Put another way, investors should bury their toes, not their head, in the sand this summer.
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 REITSs that primarily own and operate income-producing real estate.