yellow wall womanMarkets Didn’t Rally?

As Tom Petty often sang, “The waiting is the hardest part.” Whether it’s waiting for college acceptance letters, medical test results, employment offers, or Federal Reserve monetary policy changes, waiting can produce a lot of anxiety. A 2012 research paper written by Associate Professor Kate Sweeney and Graduate Fellow Sara Andrews of the University of California, Riverside, explained it like this.

 “…Although waiting for inevitable events such as the arrival of a bus or one’s turn in line may be irritating…the combination of uncertainty about the outcome and waiting for that outcome can be particularly excruciating. In fact, waiting may be more anxiety provoking than actually facing the worst case scenario…”

That may go a ways toward explaining why markets didn’t rally when the Federal Reserve decided to leave rates unchanged last week. The Federal Open Market Committee’s statement indicated they were concerned, “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.”

On the face of it, continued low rates should have been good news for assets like stocks, according to Barron’s. However, any positive aspects to the news were mitigated by the fact everyone expects the Fed to begin raising rates soon. Investors are waiting for it to happen, and they’re uncertain how economies and markets will react when it does.

Heightened anxiety may be one of the reasons investors responded the way they did last week. On Friday, after mulling the Fed’s decision, national stock market indices around the world – in the United States, England, Germany, France, and Japan – fell significantly, according to Yahoo! Finance.

Now, we’re back to waiting.

If anxiety remains high, markets may be volatile.


Data as of 9/18/15

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-0.2%

-4.9%

-2.7%

10.3%

11.4%

4.8%

Dow Jones Global ex-U.S.

1.3

-6.0

-13.0

1.3

0.9

1.3

10-year Treasury Note (Yield Only)

2.1

NA

2.6

1.8

2.7

4.3

Gold (per ounce)

3.8

-4.8

-6.5

-13.6

-2.3

9.4

Bloomberg Commodity Index

-1.4

-15.9

-27.2

-15.9

-8.7

-6.6

DJ Equity All REIT Total Return Index

2.8

-4.4

6.5

7.9

10.8

6.8

S&P 500, Gold, DJ-UBS 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 TR 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. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.  You cannot invest directly in this index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* “Markets Didn’t Rally?”

Sources:

http://www.metrolyrics.com/the-waiting-lyrics-tom-petty.html

http://www.katesweeny.com/uploads/2/6/9/4/26944848/sweeny__andrews_2014_jpsp.pdf

http://www.federalreserve.gov/newsevents/press/monetary/20150917a.htm

http://www.barrons.com/articles/for-markets-its-the-treacherous-season-1442637816?mod=BOL_hp_we_columns

http://www.marketwatch.com/story/wall-st-cant-be-more-in-doubt-about-feds-interest-rate-game-plan-2015-09-15

http://finance.yahoo.com/;_ylt=AhD.Uke2qEIR0jVXyNZxv5d.FJF4

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