EQM Capital Blog

EQM Capital LLC – Weekly Market Recap 3-28-15 The Return of Volatility?

Posted by on Mar 28, 2015 in EQM Capital Blog

stock-market-the-ride

The Dow is now down for the year

U.S. stocks traded down this week as disappointing data fueled worries about a slowing economy and profit growth just prior to the start of quarterly earnings season. The Dow and the S&P 500 Index were down every day this week before finally gaining ground on Friday. The 4-day sell-off marked the S&P 500’s longest downtrend since the middle of January, and pushed the Dow into negative territory for the year.  But the NASDAQ, and Mid and Small Caps remain positive YTD, likely helped by their lower currency exposure and weight in growth areas like biotech and all things Apple.

Economic growth casts doubt on recovery

The U.S. economy expanded at a seasonally adjusted 2.2% annual rate in Q4, the Commerce Department reported Friday. It also showed that U.S. corporate profits posted their biggest quarterly drop in four years, declining 0.8%, the first annual decrease since 2008.  Durable goods orders unexpectedly tumbled in February, the latest indicator that U.S. economic growth has stalled in Q1.  U.S. business investment spending also fell for the sixth straight month, demonstrating the hurtful impact of a strong dollar and lower crude oil prices on many U.S. multinational companies.

But the Fed still intends to raise rates, but slowly

Chair Janet Yellen said she expects the Federal Reserve to raise interest rates this year, and that subsequent increases will be gradual without following a predictable path.  Here’s a link to her statement from Bloomberg:  click here

Earnings growth slow, but still robust

According to FactSet, earnings for the S&P 500 are expected to increase 2.2% in 2015, driven by earnings growth in every sector except for energy, whose earnings are forecasted to decline 55% this year.

Return of the active manager?!

Because heightened volatility creates more opportunities to buy and sell stocks at attractive prices, the recent uptick in volatility favors active portfolio management. The increase in volatility coincides with gauges showing falling correlations in the stock market, which is also a positive trend for active managers.

U.S. Stocks1
Index2 Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 17,712.66 -415.06 -0.62%
S&P 500 2061.02 -47.05 0.10%
NASDAQ Composite 4891.22 -135.20 3.28%
S&P MidCap 400 1508.16 -32.73 3.84%
Russell 2000 1239.61 -27.51 2.90%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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EQM Capital LLC – Weekly Market Recap 3/20/15 – The Fed Loses “Patience”

Posted by on Mar 21, 2015 in EQM Capital Blog

FederalReserve

Stocks break their weekly losing streak as the NASDAQ and MidCaps hit new highs

Stocks broke their three-week losing streak and posted strong gains this week as investors welcomed dovish comments from the Fed  and rewarded relative weakness in the U.S. dollar. The NASDAQ Composite Index led the way and reached a new 15-year high on Friday.  It was helped out by strong performance from biotech stocks. Mid-cap stocks were also particularly strong, propelling the S&P MidCap 400 Index to an all-time intraday high on Friday.

Tepid economic data helps interest rate sentiment

Stocks rose at the start of the week as tepid economic data suggested that policymakers would signal no change in policy when they met at midweek.  Manufacturing output declined for the third consecutive month- mainly to reduced activity in mining and oil and gas drilling. These figures provided evidence that the economy has slowed considerably from its rapid pace in the middle of 2014, even as job gains continue to advance at a steady clip.

Fed no longer “patient” but still cautious

Fed policymakers said they do not believe that the economic expansion is in serious jeopardy but that they were growing more cautious. While announcing no change in interest rates as expected, the Fed did drop its reference to remaining “patient” about eventually  moving rates higher. In a later press conference, Fed Chair Janet Yellen clarified that removing the word “patient” from the statement “doesn’t mean we are going to be impatient.” Fed officials moved their median expectation for higher rates to the end of the year, due to somewhat lower economic growth projections. Stock prices rose dramatically on the news, as investors looked forward to the continued favorable rate environment for equities relative to bonds. The Fed’s more cautious stance also caused a sell-off in the U.S. dollar.  This was also applauded by the market as the strong dollar was weighing on the profits of U.S. multinationals.

Housing starts plunge, but weather the culprit

On Monday, the National Association of Homebuilders reported builder confidence had declined. Coupled with the news on Tuesday that housing starts had plunged in February, the data seemed to suggest a reversal in the housing sector. But most economists think severe weather is the cause. While housing starts fell quite sharply in the snowy Midwest and Northeast, the number of newly issued permits actually rose, suggesting a rebound to come in the months ahead.

Biotechs and oil stocks rally

Biotech shares benefited this week from M&A activity and favorable drug results. A rise in energy shares, due to a recovery in oil prices associated with a weaker dollar, also helped move the markets higher last week.

U.S. Stocks1
Index Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 18,127.72 378.41 1.71%
S&P 500 2108.07 54.67 2.39%
NASDAQ Composite 5026.42 154.66 6.13%
S&P MidCap 400 1540.89 47.98 6.09%
Russell 2000 1267.12 33.93 5.18%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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EQM Capital LLC – Weekly Market Recap 3/13/15 – Strong Dollar, Weak Consumer

Posted by on Mar 14, 2015 in EQM Capital Blog

strongerdollar

Major indices see third week of losses but remain near all-time highs

Stocks ended up lower this week, enduring a third consecutive week of losses, but still landing within a few percentage points of the all-time highs they established last week.  Smaller-cap indexes fared better, posting modest gains for the week thanks to their lower currency exposure.  The strong dollar remains a headwind for larger-cap names.

Strong dollar weighs on U.S. sentiment

The ongoing strength in the U.S. dollar weighed on sentiment as the U.S. dollar reached its highest level against other currencies in over a decade. Part of the problem, the euro, as the QE program by the ECB drove the currency still lower. U.S. companies are experiencing a decline in the value of profits earned in Europe, while also seeing the cost of U.S. produced goods rise. Bad news for many U.S. companies, but good news for their European counterparts. As a result, most major European exchanges closed higher for the week.

Weak retail sales?

Investors are paying close attention for any economic data that might cause Fed to take, or not take, action. On Thursday, stocks rallied after the government reported a surprising decline in retail sales in February.  Weak retail sales are sharply at odds with recent solid gains in wages.  But harsh winter weather may have played a role as it did last year. For now, these results may be enough to stave off any action from the Fed.

Consumers less confident despite wage and job gains

Investors appear to be focusing on the downside implications of weak economic data. Stocks opened mixed but then declined after the University of Michigan and Reuters reported their gauge of consumer sentiment had declined to its lowest level since November. Some speculated that bad weather, renewed market volatility, and a recent uptick in gas prices and home heating costs might have “temporarily” weighed on consumer sentiment.  Whatever the reason, consumers are not feeling as confident as they once were and that may be impacting spending.

U.S. Stocks1
Index2 Friday’s Close Week’s Change % Change Year-to-Date
DJIA 17,749.31 -107.47 -0.41%
S&P 500 2053.40 -17.86 -0.27%
NASDAQ Composite 4871.76 -55.61 2.87%
S&P MidCap 400 1492.91 6.74 2.79%
Russell 2000 1233.19 15.05 2.36%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.
The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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EQM Capital LLC – Weekly Market Recap 3/6/15 – All Eyes on the Economy and the Fed

Posted by on Mar 8, 2015 in EQM Capital Blog

watching-eyes

Stocks pull back on strong jobs report

Stocks were down for the second consecutive week. On Friday a strong monthly jobs report caused a big sell-off.  Investors were afraid the positive jobs data increased the likelihood that the Fed will increase interest rates soon. As a result, defensive, dividend-paying sectors like Utilities performed poorly as they have been proxies for fixed income in this low yield environment.  When rates go up their appeal may wane.

After 15 years, NASDAQ hit 5,000 again

On Monday, the tech-rich NASDAQ Composite Index closed above 5,000 for the first time since 2000. The NASDAQ gave back some of these gains later in the week finally closing below the elusive mark. But strength in Apple stock, which represents roughly a tenth of the Index, helped.  Apple stock was up on Friday, due to the announcement that it would replace AT&T as one of the 30 firms in the Dow Jones Industrial Average.

All eyes on the jobs report …

With 4Q earnings reporting season nearly over, all eyes have moved to the economy. Investors eagerly awaited the monthly payrolls report, as a gauge of the economy’s health. On Wednesday, the unofficial tally of private sector job gains from payroll processing firm ADP, lowered expectations for the Department of Labor report. But on Friday, it was announced that employers added nearly 295,000 jobs in February—an especially good number given bad weather in much of the country and widespread layoffs in the energy sector.

… and the Fed

The Fed’s next monetary policy meeting will be held on March 17-18.  Despite muted corporate earnings, the Fed may signal a change in policy given continued strong economic data.

U.S. Stocks1
Index Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 17,856.78 -275.92 0.19%
S&P 500 2071.26 -33.24 0.60%
NASDAQ Composite 4927.37 -36.16 4.04%
S&P MidCap 400 1486.17 -21.27 2.32%
Russell 2000 1218.14 -17.02 1.12%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.
The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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EQM Capital LLC – Weekly Market Recap 2/27/15 NASDAQ 5K – Soooo Very Close!

Posted by on Feb 28, 2015 in EQM Capital Blog

nasdaq_1910x1000

NASDAQ nears record territory

Most of the major equity indices established record highs on Friday, before selling off at the close. At its peak on Friday, the NASDAQ came within roughly 2.8% of the all-time intraday high established in March of 2000. The small-cap Russell 2000 Index also rallied this week and ended up ahead of the large cap benchmarks YTD—a notable reversal from last year.  And check out Mid Caps!  The S&P 400 MidCap Index is bested only by the NASDAQ in YTD performance.

Dovish Fed boosts market sentiment

The S&P 500 Index saw its biggest gains on Tuesday, after Fed Chair Janet Yellen’s testimony before Congress. Her comments seemed to support a continued accommodate stance of low interest rates, therefore justifying higher stock price multiples (P/E’s). Investors were encouraged to hear Yellen’s assurances that a rate increase was not imminent.

Oil prices tumble again

Energy stocks again performed poorly this week, due mainly to a sharp drop in oil prices on Thursday. A rise in U.S. inventories sent the price of  WTI crude down over 5% for the day.  Global oil prices held on to recent gains due to reports of declining production in Iraq, Libya, and elsewhere. Overall U.S. production has remained fairly strong, even with many producers taking rigs offline.

Business spending up, but all eyes still on the consumer

The week’s economic data was mixed. The government announced Friday that the economy had grown a little less than first estimated Q4 2014, even with consumer spending increasing at its fastest pace in nearly four years. A decline in inventory build was largely to blame for the downward revision.  As an offset, business capital spending increased considerably more than first estimated.  But most economists still believe that consumer spending will still be the key growth driver in 2015.

U.S. Stocks1
Index Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 18,132.70 -7.74 1.74%
S&P 500 2104.50 -5.80 2.21%
NASDAQ Composite 4963.53 7.56 4.80%
S&P MidCap 400 1507.44 -7.40 3.79%
Russell 2000 1235.16 5.15 2.53%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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EQM Capital LLC – 2014 Market Year in Review

Posted by on Jan 9, 2015 in EQM Capital Blog

A Good Year for the Market, but not Diversification

2014 was another good year for the U.S. stock market, but most investors were not able to fully participate in the market’s gains. The S&P 500 Index was up more than 13% for the year, but according to a study from SigFig, the median investor’s investment account rose only 4% last year.

sigfig

The U.S. stock market was the place to be in 2014. While U.S. large cap stocks achieved double-digit returns, bonds and small cap stocks were only up in the single digits, and international stocks were actually down for the year.

Asset Class Index 2014 Total Return
Large Cap S&P 500 13.7%
Small Cap Russell 2000 4.9%
Bonds Barclay’s Aggregate Bond 6.0%
International MSCI EAFE -7.4%
Emerging Markets MSCI Emerging Markets -4.6%

Source: Morningstar
Performance Disclosure:  The performance data quoted represents past performance and does not guarantee future results.

In short, 2014 was a year that did not reward diversification. However, we know that over the long-term, portfolio diversification is very important in order to maximize return and minimize risk. Putting all your eggs in one basket may pay off in the short-term, but it is not a prudent long-term strategy.
Why is it important to be diversified? It is all about correlation. If all your portfolio assets move in the same direction in relation to each other, if they are “correlated”, then you are not sufficiently diversified. What diversification provides in essence is an “insurance policy” in down markets.

Year in Review

As anticipated, the U.S. economy showed marked improvement this year. Employment levels and new job creation are strong. Wages are finally starting to move up. And the latest quarterly GDP number came in at a very robust 5%. Most recently, low energy prices have provided a nice tailwind for the economy particularly in consumer-related areas like retail. Thanks to lower prices at the pump, consumers have more cash in the wallets to spend.

But there were also some big surprises last year.

• Whereas the U.S. economy has been steadily improving, Europe, Asia, and many other economies have not kept pace. Their recovery has stalled and as a result, international markets and investments have significantly lagged the U.S. markets.
• For most of the year, the big winners of 2013, small cap stocks have not kept up with the overall market and are up only marginally for the year.
• Interest rates have NOT moved higher! This was one of the biggest surprises of this year. Despite progress in the U.S. economy, slow economic growth overseas and declining energy prices are keeping interest rates low.

Outlook for 2015

What’s in store for the markets next year? Here’s what most market strategists expect:
• Interest rates will rise - At some point, given the current strength of the economy, the Fed will begin slowly raising interest rates.
• Non-U.S. markets should improve – International growth should begin to recover as other countries implement stimulus measures similar to what succeeded in the U.S.
• Oil price will stabilize – Oil prices should begin to stabilize as supply-demand imbalances finally work themselves out.
• U.S. still strong – U.S. companies should continue to hire and invest in their future growth, which is good for stocks, corporate earnings and the general health of the economy.
• Housing recovery continues – Despite higher interest rates, the housing recovery should continue given strength in the job market and improved consumer confidence.
• More of the same in the first half – During the first half of the year, the U.S. continues to look like the place to be, but opportunities may emerge outside the U.S. by the second half of next year.

Here’s to a happy, healthy and prosperous 2015!

The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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