William Riegel, Chief Investment Officer TIAA Investments
September 2, 2016
The middle-of-the road report dampened expectations for imminent Fed action, boosting global equities. In light trading ahead of the Labor Day weekend, the S&P 500 Index was primed to extend its modest gains from earlier in the week. Meanwhile, Europe’s broad STOXX 600 returned 2% for the week (in local currency terms) to reach a four-month high.
William Riegel, Chief Investment Officer, TIAA Investments
Current updates to the week’s market results are available here.
Returns for non-Treasury “spread sectors” were broadly negative for the week through September 1. High-yield bonds bucked that trend with a small gain.
Among the week’s other releases:
As for U.S. monetary policy, hawkish Fed rhetoric prior to the release of the August payrolls report had led markets to raise the odds of a September rate hike to nearly 30%. That figure plunged to about 10% immediately after the release but reversed course later in the day as markets continued to digest the implications of the jobs data. In our view, a September increase is off the table, as the Fed’s voting members currently lack consensus on such a near-term move, and even a December hike is far from certain. Moreover, global events with the potential to disrupt financial markets could allow the Fed to hold off until next year.
That said, we believe a pullback represents a buying opportunity. Although the economy’s momentum has waned slightly, its overall trend is still positive, with third-party surveys moving higher over the past six months and many economic data releases surprising to the upside. In addition, the equity market’s advance has been led by Financials, small-cap stocks, and cyclical industries such as machinery, all of which tend to outperform when the economy is stronger.
Foreign stock market returns are stated in U.S. dollars unless noted otherwise.
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