William Riegel, Chief Investment Officer TIAA Investments
September 16, 2016
In the U.S., the S&P 500 Index appears to have fully awakened from its summer slumber. In a week that saw back-to-back one-day returns of 1.47% and -1.45%, the index gained 0.5%. Europe’s broad STOXX 600 Index declined 2.2% (in local currency terms), its poorest one-week showing in three months. Japanese stocks also stumbled, with the Nikkei 225 Index falling 3% (in U.S. dollar terms) for the week through September 15, as investors braced for the Bank of Japan’s next policy meeting, which coincides with the Fed’s.
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 15.
Lastly, as reported by the U.S. Census Bureau, real median household income surged 5.2% from 2014 to 2015, its first annual increase since 2007.
In fixed-income markets, we still believe high-grade corporate bonds offer reasonable value and should offer some principal protection if rates do indeed rise, given the asset class’ reduced sensitivity to interest-rate changes. The opportunity to buy riskier assets such as lower-quality high-yield corporate bonds, emerging-market debt denominated in local currencies, and lower-rated structured credit may improve in the coming months. Also looking ahead, volatility in fixed-income prices, credit spreads, and U.S. Treasury yields are likely to pick up should we see increased geopolitical uncertainty and inconsistent economic releases. Markets will likewise be influenced by central banks, starting with the upcoming Fed and Bank of Japan policy meetings.
Foreign stock market returns are stated in U.S. dollars unless noted otherwise.
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