The S&P 500 Index broke out to all-time highs on Monday, only to be dragged down by the fall in oil prices. Monday’s gains were large enough to overcome the rest of the week and major markets finished higher. The S&P 500, the MSCI All Country World Index, and the Bloomberg BarCap U.S. Bond Index all managed to rise 0.2%. Investors, concerned about the Federal Reserve raising rates too quickly, continue to push long-term bond rates lower.
Oil has declined more than 20% since mid-February, primarily due to the strong rebound in the U.S. shale oil drilling and production. U.S. crude oil production now stands at more than 9.3 million barrels a day, near the August 2015 high. The global supply glut continues to be a key concern.
Internationally, MSCI finally decided to include China’s A-shares in its emerging market index. The move validates the country’s recent attempts to build greater liquidity into its stock exchanges in. Previously, only Chinese companies listed in Hong Kong or non-Chinese exchangers were included in the index.
What are we reading?
Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links:
Crude oil is trading below $45 per barrel. Oil prices dropped on Wednesday and have failed to recover, amid continued concerns about oversupply. U.S. government data revealed a rise in domestic crude production, intensifying concerns over the glut of global supply even as domestic stockpiles fell for a second straight week. At the same time, drivers continue to consume less gasoline than expected. OPEC’s production cuts don’t appear to be significant enough to support prices.
Apple’s iPhone turned ten this week and the impact it has on our daily lives is massive. Phone calls have been replaced by a myriad of other options. Constant updates of social media and frequent selfies have upended industries. Digital camera sales fell 80% between 2010 and 2016. Music streaming has become the way young people listen to music and ride hailing firms like Uber and Lyft couldn’t exist without this technology.
Chinese stocks hit an 18-month high following MSCI’s decision to include them in its global benchmark equity index for the first time, marking a milestone in the country’s efforts to draw international funds. MSCI’s move means mainland equities, known as A-shares, will be included in its flagship emerging markets index in the middle of next year. Their inclusion obliges the estimated $1.6tn of investment funds that track the index to buy the stocks.
Fun Story of the Week
Thirteen years ago Jerry Lynn dropped an alarm clock in a hole in his wall while using it to pinpoint the spot where he could run a wire for a television. This non-standard use of an alarm clock quickly came back to bite him when it fell behind the wall. Lynn assumed the battery would wear out after a few months. Instead, it continues to disturb guests and remind Lynn and his wife Sylvia what time it is thirteen years later.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of CWM, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large and mid-cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.