Weekly Market Commentary: September 28, 2015

Provided by geralt/Pixabay
Provided by geralt/Pixabay

Oh, the uncertainty!

Investors are keeping one eye on the Federal Reserve and the other on politicians trying to determine what may happen during the last quarter of the year.

The Fed, which is the central bank of the United States, is responsible for conducting monetary policy with an eye toward full employment and stable prices. If, as St. Louis Fed President James Bullard told Reuters, the economy is near full employment and inflation is sure to rise, then why didn’t the Fed raise rates in September?

Reuters reported voting members of the Federal Open Market Committee (FOMC) decided uncertainty in global markets had the potential to negatively affect domestic economic strength. Mr. Bullard believes the decision puts an October increase in doubt, too, according to Nasdaq.com. Mr. Bullard told reporters:

“For the committee, it’s always hard to have made a big decision at one meeting and come back at the next meeting. The key question will be what kind of data did you get during the intervening period that changed your mind, and it’s not that clear what data we will have in hand in October that we would be able to cite to support my position, relative to what we had at the September meeting. But it is possible.”

Regardless, Chairwoman Janet Yellen made it clear last week she expects to see a rate hike before year-end. That might have helped settle markets, except Speaker of the House John Boehner resigned soon after Yellen spoke. The Speaker’s resignation made a government shutdown this week less likely, according to Barron’s. However, fiscal policy issues haven’t been resolved. A meeting of the political minds this week would set the stage for a mid-December showdown and that’s data the Fed will have to consider if the December FOMC meeting occurs amidst a government shutdown and debt-ceiling crisis.

No one seemed to be happy with the state of affairs this week, and stock markets were awash in red ink.

Data as of 9/25/15 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -1.4% -6.2% -1.8% 10.2% 11.1% 4.7%
Dow Jones Global ex-U.S. -3.4 -9.2 -13.7 0.2 -0.1 0.9
10-year Treasury Note (Yield Only) 2.2 NA 2.5 1.7 2.5 4.3
Gold (per ounce) 0.5 -4.4 -5.5 -13.5 -2.4 9.5
Bloomberg Commodity Index 0.9 -15.2 -25.7 -15.5 -8.7 -6.6
DJ Equity All REIT Total Return Index -0.3 -4.7 8.4 9.0 11.6 6.9

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

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