Viewing article within:
Wall Street to Your Street
February Recap: Wild Ride on a Merry-Go-Round
February 29, 2016 | Jeff Branstad, CFA, Investment Product Management
Recap for the month ended Feb. 29, 2016
February brought plenty of motion but little action, as the S&P 500® ended the rocky month at a level very close to where it began.
After opening 2016 with a 5.1% stock market loss in January, the volatility continued unabated throughout February. The month began with a steep two-week decline, doubling up on the January drop.
By mid-month the S&P 500 had fallen below 1840 – marking a decline of more than 10% for the year. But after hitting bottom on Feb. 15, the market made a recovery in the second half of the month that resembled a mirror image of the first half decline.
By month’s end, the market had reclaimed nearly all the lost ground, with the S&P 500 finishing at 1932 – just seven points shy of the 1939 level where the month began.
The market for 10-year Treasuries continued to thrive in February as investors switched to bonds to flee the uncertainty of the stock market. But that trend could be short-lived since yields have become increasingly unattractive. By the end of February, the yield on Treasuries purchased on the secondary market had fallen to about 1.75% – the lowest yield range since 2013.
By the numbers
Market activity in February, as reflected in the most common market indexes we follow.
|Dow Jones Industrial Average1||0.8%||-4.7%||0.2%|
|S&P 500® Index2||-0.1%||-5.1%||1.4%|
|Russell 2000® Index3||-0.0%||-8.8%||-4.4%|
|MSCI EAFE Index4||-1.8%||-8.9%||-0.4%|
|MSCI Emerging Markets Index5||-0.2%||-6.6%||-14.6%|
|Barclays U.S. Aggregate Bond Index6||0.7%||2.1%||0.6%|
|Barclays 20+ Year Treasury Index7||0.9%||3.0%||0.8%|
|Barclays U.S. Corporate Investment Grade Index8||0.8%||1.2%||-0.7%|
|Barclays U.S. High Yield Index9||0.6%||-1.0%||-4.5%|
|Barclays Municipal Bond Index10||0.2%||1.4%||3.3%|
|U.S. Treasury Yields||As of|
|3-Month U.S. Treasury Bill||0.33%||0.33%||0.16%|
|5-Year U.S. Treasury Bond||1.22%||1.33%||1.76%|
|10-Year U.S. Treasury Bond||1.74%||1.94%||2.27%|
|30-Year U.S. Treasury Bond||2.61%||2.75%||3.01%|
What’s driving the markets?
The market’s volatility seems to reflect a difference of opinion in the financial world regarding the direction of the U.S. and global economy. The bears prevailed through the first half of February while the bulls stole the stage in the second half.
Generally speaking, there were no dramatic defining moments in February to propel the market in either direction:
- China continued to struggle with a slowing economy and weakening currency, but that’s a story that has been ongoing for many months.
- Oil prices seemed to stabilize after Russia, Saudi Arabia, Qatar and Venezuela agreed to freeze production at early-January levels, but that agreement remains tentative, awaiting a buy-in from other key producers.
- The Federal Reserve showed no signs of making a rate change in the near future.
- Revised GDP numbers from the 2015 fourth quarter, released in late February, showed the economy growing at a faster rate than previously reported. Consumer spending, on the other hand, was weaker than the preliminary numbers had indicated.With key measures offering a conflicting picture of the direction of the economy, the tug-of-war between bulls and bears may continue, perpetuating the volatility that has characterized the stock and bond markets thus far in 2016.
With key measures offering a conflicting picture of the direction of the economy, the tug-of-war between bulls and bears may continue, perpetuating the volatility that has characterized the stock and bond markets thus far in 2016.
In their Market Commentary, Thrivent Asset Management leaders discuss the financial markets, the economy and their respective effects on investors. Writers’ opinions are their own and do not necessarily reflect that of Thrivent Financial. Forecasts, estimates and certain other information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. From time to time, to illustrate a point, they may make reference to asset classes or portfolios they oversee at a macro-economic level. They are not recommending the purchase of any individual security. Asset management services provided by Thrivent Asset Management, LLC, a wholly owned subsidiary of Thrivent Financial, the marketing name for Thrivent Financial for Lutherans.
Securities and investment advisory services are offered through Thrivent Investment Management Inc., 625 Fourth Ave. S., Minneapolis, MN 55415, a FINRA and SIPC member and a wholly owned subsidiary of Thrivent Financial. Past performance is not a guarantee of future result.
1 The Dow Jones Industrial Average is an index of 30 "blue chip" stocks traded in the U.S.
2 The S&P 500® Index is a widely followed index, and is composed of 500 widely held U.S. stocks.
3 The Russell 2000® Index measures performance of small-cap stocks.
4 The MSCI EAFE Index measures developed-economy stocks in Europe, Australasia and the Far East.
5 The MSCI Emerging Markets Index measures developing-economy stocks.
6 The Barclays U.S. Aggregate Bond Index measures performance of a wide variety of publicly traded bonds.
7 The Barclays 20+ Year Treasury Index measures performance of longer maturity treasury bonds.
8 The Barclays U.S. Corporate Investment Grade Index measures performance of the investment grade bond sector.
9 The Barclays High Yield Index measures performance of the high yield bond sector.
10 The Barclays Municipal Bond Index measures performance of the municipal bond sector.