Although our financial industry and media have worked diligently to have people focus on daily market swings, in my opinion markets are best monitored on a monthly, quarterly, and annual basis. Why? It takes out the noise, of which there is plenty.
In this spirit, I plan on providing a month-to-date review of market stats along with appropriate commentary on news of note from the prior week. I hope readers find this review beneficial. Feedback always welcome.
Equities (Friday 9/04/09 close, month-to-date return)
DJIA: 9441, -.6%
Nasdaq: 2019, +.5%
S&P 500: 1016, -.4%
MSCI Emerging Mkt Index: 844, 0.0%
DJ Global ex U.S.: 184, +3.3%
Commentary: after an initial selloff early in the week, the markets rallied on Thursday and Friday, primarily after the employment report. I place a heavy discount on this week’s trading activity given the very heavy vacation calendar and long holiday weekend. I remain in the camp that the equity markets will correct 5 to 7% from current levels.
2yr Treasury: .93%, down 5 basis points (1 basis point is .01%)
10yr Treasury: 3.44%, up 3 basis points
COY (High Yield ETF): 6.14, +1.5%
FMY (Mortgage ETF): 17.31, -.5%
ITE (Government ETF): 57.18, -1.0%
NXR (Municipal ETF): 14.09, 0.0%
Commentary: while interest rates gyrated during the week, the biggest development was the yield curve steepening. Why? What is going on? Two things. There is definitely an increased nervousness about the economic recovery. This anxiety is causing more investors to seek the safety of short maturity U.S. Treasuries. Additionally, the market has its regular 3yr, 10yr, and 30yr auctions next week. In the face of that supply, the street is trying to back up rates on the longer maturity paper (10yr and 30yr) to take it down at a more attractive rate.
$/Yen: 93.02 vs 93.11 at August month end
Euro/Dollar: 1.4304 vs 1.4338 at August month end
U.S. Dollar Index: 78.20 vs 78.14
Commentary: minor moves up and down
Oil: $67.79/barrel vs $69.93 at August month end
Gold: $996.1/oz. vs $952.4 at August month end
DJ-UBS Commodity Index: 122.93 vs 125.73 at month end
Commentary: in my opinion, the moves in commodities represent the strongest indication of global economic activity. The continued downtrend in oil specifically and commodities in general signifies to me a slowing in the global economy. Where is the money going? Gold. Why? Investors are getting nervous and gold is a safe haven.