PMC Market Commentary: December 5, 2014

A Macro View – November Monthly Recap

Domestic equity markets gained ground again in November, in a continuation of the recovery from the September lows. Economic data remained a key driver of the market’s gains, as both consumer spending and business investment are trending higher. The one segment of the market that continued to struggle in the month was energy, which plunged as a result of the sharp drop in crude oil prices. Slowing demand and OPEC efforts to suppress prices in order to discourage fracking in the U.S. contributed to energy’s slide. Domestic economic data continues to make gains, with the latest estimate of third quarter real gross domestic product (GDP) coming in at +3.9%, up from the previous estimate of +3.5%.

Within this landscape, stocks posted moderate gains in November. The S&P 500 gained +2.7% for the month, and is now up +14.0% on a year-to-date basis. The Dow Jones Industrials also marched higher, gaining +2.9%. The tech-heavy Nasdaq Composite Index rose +3.7%, and is now up +16.0% year-to-date. The Russell 2000 Index of small cap stocks struggled on a relative basis, underperforming the Russell 1000 Index of large cap stocks, with returns of +0.1% and +2.6%, respectively. Growth stocks outperformed value stocks during the month. In terms of sector performance, the top performers in the month were consumer staples, consumer discretionary and information technology with gains of +5.5%, +5.4% and +5.3%, respectively. Energy, telecommunications services and utilities were the laggards, with returns of -8.5%, 1.2% and 1.2%, respectively.

International equity markets posted varied performance in November, which is not unusual for this year. Investors remain concerned with lackluster growth outlooks for the eurozone and emerging markets. Many analysts, however, now contend that European stocks are among the best values globally, and should soon begin to generate strong relative performance. The MSCI World ex-U.S. Index gained +2.1% for the month. Emerging markets reverted their former lagging performance in November after having staged somewhat of a rebound in October. The MSCI Emerging Markets Index declined -1.1% for the month, and the MSCI EAFE Index, which measures developed markets performance, was up +1.4%. Regionally, Europe was the best performer on a relative basis, advancing +2.7%. Eastern Europe and Latin America were among the poorest performers, with results of -7.7% and -4.6%, respectively.

Fixed income markets had another month of respectable gains in November, as investors continued to assess the outlook for interest rates now that the Federal Reserve’s asset purchase program has ended. Analysts are now focusing attention on the prospects for the shape of the yield curve, with the consensus being that the curve will eventually invert as rates are normalized. Against this backdrop, the 10-year U.S. Treasury yield ended the month at 2.19%, down 15 basis points from the 2.34% level of October 31st. Broad-based fixed-income indices were mostly higher in November, with the Barclays U.S. Aggregate Bond Index gaining 0.7% for the month. As in October, global fixed-income markets performed relatively poorly, with the Barclays Global Aggregate ex-U.S. Index declining -1.1% for the month. Intermediate-term corporate bonds gained ground, as the Barclays U.S. Corporate 5-10 Year Index advanced +0.8%. The Barclays U.S. Corporate High Yield Index ended the month with a loss of -0.7%. Municipals continued to deliver positive gains, returning +0.2% for the month. Municipals are now up +8.5% for the year.

Download the full PDF

The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this weekly review is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Past performance is not indicative of future results.

Information obtained from third party sources are believed to be reliable but not guaranteed. Envestnet|PMC™ makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.

Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. Income (bond) securities are subject to interest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments. Investing in commodities can be volatile and can suffer from periods of prolonged decline in value and may not be suitable for all investors. Index Performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. An investment cannot be made directly into an index.

Alternative Investments may have complex terms and features that are not easily understood and are not suitable for all investors. You should conduct your own due diligence to ensure you understand the features of the product before investing. Alternative investment strategies may employ a variety of hedging techniques and non-traditional instruments such as inverse and leveraged products. Certain hedging techniques include matched combinations that neutralize or offset individual risks such as merger arbitrage, long/short equity, convertible bond arbitrage and fixed-income arbitrage. Leveraged products are those that employ financial derivatives and debt to try to achieve a multiple (for example two or three times) of the return or inverse return of a stated index or benchmark over the course of a single day. Inverse products utilize short selling, derivatives trading, and other leveraged investment techniques, such as futures trading to achieve their objectives, mainly to track the inverse of their benchmarks. As with all investments, there is no assurance that any investment strategies will achieve their objectives or protect against losses.

Neither Envestnet, Envestnet|PMC™ nor its representatives render tax, accounting or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Taxpayers should always seek advice based on their own particular circumstances from an independent tax advisor.

© 2014 Envestnet. All rights reserved.


Brandon Thomas
Chief Investment Officer

Articles By This Author

Video: Insights on Impact Economic and Market Overview: Second Quarter 2017 PMC Weekly Review - April 7, 2017 Economic and Market Overview: First Quarter 2017 Diversification: An Expensive Lunch Recently, But Free Over Time PMC Weekly Review - February 3, 2017 Economic and Market Overview: Fourth Quarter 2016 PMC Weekly Review - December 2, 2016 Post-Election, Will Markets and Portfolios Emerge Winners or Losers? Webinar Replay: Post-Election Winners and Losers PMC Weekly Review - November 4, 2016 Money Market Reform: What Does it Mean for Investors? PMC Weekly Review - October 7, 2016 Economic and Market Overview: Third Quarter 2016 PMC Weekly Review - September 2, 2016 PMC Weekly Review - August 5, 2016 Economic and Market Overview: Second Quarter 2016 PMC Weekly Review - July 1, 2016 Managing Volatility—A Little Planning Goes a Long Way A Surprise Brexit Leaves the Markets in Uncertain Territory Once Again PMC Weekly Review - June 3, 2016 PMC Weekly Review - May 6, 2016 Economic and Market Overview: First Quarter 2016 PMC Weekly Review - April 1, 2016 The Value of Value PMC Weekly Review - March 4, 2016 PMC Weekly Review - February 5, 2016 PMC Weekly Review - January 8, 2016 Economic and Market Overview: Fourth Quarter 2015 PMC Weekly Review - December 4, 2015 PMC Weekly Review - November 6, 2015 Economic and Market Overview: Third Quarter 2015 PMC Weekly Review -October 2, 2015 Smart Thinking PMC Weekly Review - September 4, 2015 Turmoil in Global Markets: China’s Currency Devaluation PMC Weekly Review - July 31, 2015 PMC Weekly Review - July 10, 2015 Economic and Market Overview: Second Quarter 2015 PMC Weekly Review - June 26, 2015 PMC Weekly Review - June 5, 2015 PMC Weekly Review - May 1, 2015 PMC Weekly Review - April 10, 2015 Economic and Market Overview: First Quarter 2015 Video: The PMC Spotlight: Quantitative Portfolios: Factor-Enhanced Series PMC Weekly Review - March 6, 2015 PMC Weekly Review - February 6, 2015 PMC Weekly Review - January 16, 2015 Economic and Market Overview: Fourth Quarter 2014 PMC Market Commentary: January 2, 2015 PMC Market Commentary: December 5, 2014 PMC Market Commentary: November 21, 2014 PMC Market Commentary: November 7, 2014 PMC Market Commentary: October 24, 2014 Economic and Market Overview: Third Quarter 2014 PMC Market Commentary: October 3, 2014 PMC Market Commentary: September 5, 2014 PMC Market Commentary: August 29, 2014 PMC Market Commentary: August 1, 2014 PMC Market Commentary: July 18, 2014 PMC Market Commentary: July 11, 2014 Economic and Market Overview: Second Quarter 2014 PMC Market Commentary: June 20, 2014 PMC Market Commentary: June 6, 2014 PMC Market Commentary: May 30, 2014 PMC Market Commentary: May 2, 2014 PMC Market Commentary: April 4, 2014 Economic and Market Overview: First Quarter 2014 PMC Market Commentary: March 7, 2014 Tracking Error Primer A Guide to PMC Quantitative Portfolios New Choices for New Challenges – The Case for Liquid Alternatives