Tuesday, September 22, 2015

MARKET UPDATE AND COMMENTARY
September 20, 2015


The Federal Reserve announced on Thursday afternoon that it would leave interest rates unchanged for the time being.  The Fed provided three basic reasons for holding rates: 1) lack of inflationary pressure, 2) global economic uncertainty, and 3) recent market turbulence.  Market reaction to the news was as confused as I believe many investors are about the Fed’s decisions.  The initial move to the announcement on Thursday afternoon was an immediate pullback.  The Dow Jones Industrial Average (DJIA) fell 184 points (1.1%), but quickly rallied adding 246 points (+1.5%) peaking around 2:45 PM.  By the market close at 4:00 PM, however, the DJIA had shed 259 points (-1.5%) to close the day with a net loss of 65 points (-0.4%).  The real damage came on Friday when international and US markets sold off as investors had time to digest the Feds’ less than optimistic view of a slowing global economy.  While I believe global growth worries factored into Friday’s 1.7% decline in the DJIA, I also believe that at least some of sell-off might be attributed to the recognition that by putting off a rate increase now, when the Fed does raise rates, the size and timing of those rate increases may have to be larger and faster.  Larger and faster has historically led to economic downturns (i.e. recessions).


Time Period
Dow Jones
Industrial Average
(DJIA)

S&P 500

Russell 2000

NASDAQ
Third Quarter to Date
-7.01%
-5.09%
-7.23%
-3.20%
September to Date
-0.87%
-0.72%
0.34%
1.06%
Week of September 14
-0.30%
-0.15%
0.48%
0.10%
Year-to-Date
-8.07%
-4.90%
-3.43%
1.93%
Source:  The Wall Street Journal (Past performance is not indicative of future returns).  As of market close September 18, 2015.

Bond investors have been watching the Fed closely for some time now trying to anticipate interest rate moves.  In the days leading up to Thursday’s announcement, yields on the US Treasury 10-year bond inched higher as investors hedged their bets of the Fed pushing the overnight lending rate up by 0.25%.  When that did not happen, the yield on the 10-year US Treasury fell from last Wednesday’s close of 2.299% to 2.132% on Friday’s close.  Looking back over the entire year, however, the bond market has been calm compared to stocks.  Friday’s close is just 4 basis points (a basis point is .01% or like a penny to a dollar) below from where this benchmark yield began the year.  The Barclays US Aggregate bond index is up just 0.9% for the year with the preferred stock (2.0%) and bank loan (1.7%) sectors leading all other bond sectors for the year.  The emerging market bond sector is the weakest of all bond sectors with a loss of nearly 4.5%.  Weak commodity prices, a stronger US Dollar, and poor governance in general have really hurt the emerging markets in 2015 and that weakness has spilled over to the bond sector. 

Looking at international markets, concerns over lower Chinese growth estimates has put a damper on overall global growth estimates and has contributed to lower equity returns.  China, the largest contributor to the Emerging Market Region Total Stock Market index, has helped push this index down 13.9% in 2015 despite a 2.7% gain last week.  The Emerging Market Region index has shown some stability recently but massive government intervention in Chinese markets makes it hard to determine what the real story is there.  Additionally, millions of Middle Eastern refugees are entering Europe that may ultimately prove, in my view, to be a heavy burden on public treasuries in countries that cannot afford more government spending.  I also continue to remain very concerned about the overall unemployment situation in Europe and the drag that has on the Euro Zone economy.  Overall, I cannot find much to give me a lot of enthusiasm for international equities today.


Time Period

Global Dow xUS

STOXX 600
Dow Jones
Devel Mkt Region
Total Stock Market
Dow Jones
Emerg Mkt Region
Total Stock Market
Third Quarter to Date
-8.91%
-6.96%
-6.08%
-15.67%
September to Date
-0.59%
-2.21%
-0.68%
0.88%
Week of September 14
1.26%
-0.27%
0.38%
2.74%
Year-to-Date
-5.97%
3.57%
-4.07%
-13.91%
Source:  The Wall Street Journal (Past performance is not indicative of future returns).  As of market close September 18, 2015.

Commodities remain weak across the board.  WTI Oil is down 16% in 2015 and is down 58.3% from a high of $107.26 back in June 2014.  Metals, grains, cotton, coffee are all down in 2015.  This broad decline in commodity prices has driven the UBS Commodity index down 15.9% this year.  Global demand for commodities has weakened especially as China’s growth has slowed.  The Chinese have been one of the major commodity consumers over the past decade and a drop in demand by China is felt by all commodity producers. 

The US Dollar is now up 6.6% compared to the Euro this year and is up 18.8% since the stronger US Dollar trend began in the spring of 2014.  The stronger US Dollar has hurt US-based global corporations by increasing the price of goods sold abroad and by reducing profits when foreign currencies are converted into US Dollars for accounting purposes.  I have said in earlier Updates that a strong US Dollar also hurts commodity sales globally because more than 90% of all commodity transactions occur in US Dollars.  Foreign traders must purchase dollars before they complete their transactions, and a stronger US Dollar adds to the overall cost of a commodity to those traders.  Following one of the basic axioms of economics, when the price of something goes up, the demand generally falls.  Finally, currency traders, in my view, have pushed the value of the US Dollar up for two primary reasons: first, the prospect of the Federal Reserve raising interest rates has global bond traders buying higher-yielding Treasury bonds—transactions that obviously take place in US Dollars, and second, global uncertainty pushes traders to buy secure US Treasuries.  As long as these two factors are present, I believe the US Dollar will remain strong.

HAS THE FEDERAL RESERVE LOST ITS NERVE?

Count me as someone who is disappointed in the Fed’s decision to leave interest rates unchanged.  It is too early to see if traders will adopt that position, but Friday’s stock market pullback may be a first hint to investor sentiment.

My disappointment in the Fed stems from several points.  First, I believe that macro economic factors such as
employment and inflation data in normal times would warrant interest rates higher than where they are today.  Second, I know global growth is slowing, and there are concerns over Iran, and over Russia’s intervention in Syria and Ukraine.  The point is there are always concerns.  By Janet Yellen’s reasoning, we may never find the “perfect” time to raise rates.  Finally, and this is crucial in my view, the longer the Fed delays raising rates, the greater the likelihood that the Fed will be late to recognize when the US economy is overheating and will be late in its efforts to temper inflation.  The Fed’s tardiness may result in larger and more frequent rate hikes in the years to come.  As I noted earlier, larger and frequent rate increases has led to recessions in the past and I think we can all agree that recessions are bad for everyone.

I am not Janet Yellen, Chair of the Federal Reserve, so what I think about the decision to hike rates does not matter.  What does matter is what impact this may have on markets.  Here are some quick thoughts on each of the major asset categories I follow:

                US STOCKS:  Stocks are driven by profits.  If the Fed is right and the economy is slowing, then profits may be a little harder to come by hurting stocks.  Interest-rate sensitive sectors like Utilities and Real Estate should be helped by not raising rates.  Financials, which benefit from higher rates, may lag for a while.  What will matter in US stocks, and this applies to the other asset categories as well, is how long will the Fed hold off on raising rates.  Investors will likely factor this into their trades in the market over the next few months.

                INTERNATIONAL STOCKS:  Major exporters to the US should benefit by the Fed’s stall on rates because the US Dollar may weaken a bit as the lure of higher rates on US Treasuries decreases.  While global markets have become increasingly connected, I do believe there are a number of local Euro-area or Asian-area factors that will impact stocks of international companies beyond what happens here in the US.  Emerging markets will be the likeliest beneficiary of the Fed’s inaction by helping the price of commodities, however, if investors believe it is just a matter of time before rates do increase, any benefit to the emerging markets may be short-lived.

                BONDS:  The bond market is heavily influenced by interest rate actions taken by the Fed.  This time is no different.  We have seen bond values in many bond sectors rise last week as rates pulled back in response to the no increase decision by the Fed.  Additionally, if investors are convinced that the Fed’s more pessimistic economic outlook is correct, I believe bond investors will keep yields on bonds lower and valuations higher.  Watching the general direction of longer-duration yields like the 10-year US Treasury may give some insight into what the Fed is doing and when they might take action on raising rates.

                CURRENCIES:  Currency prices are driven by supply and demand factors.  Prices of a currency X go up when more traders want currency X over currency Y.  This is the most basic of economic concepts.  While the concept is basic, getting the timing and direction of currency moves is hard to predict just as it is with the other major asset categories.  Higher interest rates on government and corporate debt are but one of the factors that make a currency attractive to foreign investors.  They will sell other currencies to buy the US Dollar, for example, in order to invest in US debt and get the higher yields.  Although the US Dollar has strengthened this year, it has been weakening ever so slightly in the weeks leading up to the Fed’s decision on Thursday to hold US interest rates steady.  I believe you can get a sense of what many traders believe by watching the direction of currencies to the US Dollar.  Continued US Dollar weakening will signal a lower likelihood of higher rates in the future and vice versa.  Longer-term, I believe the US Dollar will remain attractive to foreign investors.

                COMMODITIES: I believe the greatest influence on commodity prices is simply supply and demand.  Therefore, a slowing global economy will likely continue to hurt the overall value of commodities more than any changes to US interest rates.  However, I have also said that a stronger US Dollar hurts the value of commodities by reducing demand through higher prices.  Therefore, the decision by the Fed to hold rates at current levels for now will help the pricing of commodities if the US Dollar weakens.  It is hard to determine at this time if the US Dollar weakens enough to change the trend of weaker commodity demand around the world.  

LOOKING AHEAD

Not much going on this coming week compared to the previous week.  The Federal Reserve does not meet again until October 27-28.  Early indications are that the Fed is not likely to change rates at this meeting but will wait till the December meeting, if at all.  The final revision of the 2nd Quarter Gross Domestic Product will be released on Friday.  No change is expected from last month’s revision of a growth rate of 3.7%.

I wish I could say that one of the big uncertainties facing markets this year had been cleared up by the Fed last Thursday, but it was not.  I believe we will continue to debate the timing and size of the Fed’s increase for the rest of the year.  As I have said, watch the strength of the US Dollar to get some insight on what investors believe the Fed will do and when.

My guidance on stocks, bonds, etc., has not changed.  US Stocks are the favored major asset category followed by Bonds, Money Market Funds, International Stocks, Currencies, and Commodities.  With the Money Market asset category ahead of International Stocks, I am not making adding international stocks to portfolios at this time.





Source: DorseyWright & Associates, Past Performance is Not Indicative of Future Returns

Within US Stocks, I prefer Growth over Value, Small and Mid-Capitalization stocks over Large.  And within the major economic sectors, I prefer Health Care, Consumer Cyclical, and Technology over all others.

Within the Bond sectors, I prefer the Preferred, Floating Rate, and High Yield sectors.

If you have any questions or comments, please do not hesitate to reach out to me. 











Paul L. Merritt, MBA, C(k)P®, AIF®, CRPC®
Principal
NTrust Wealth Management

P.S.  If you think this type of analysis would be of benefit to anyone you know, please share this communication with them.

Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be obtained.  Technical analysis is just one form of analysis.  You may also want to consider quantitative and fundamental analysis before making any investment decisions.

All indices are unmanaged and are not available for direct investment by the public.  Past performance is not indicative of future results.  The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors and is a capitalization-weighted index meaning the larger companies have a larger weighting of the index.  The S&P 500 Equal Weighted Index is determined by giving each company in the index an equal weighting to each of the 500 companies that comprise the index.  The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company.  The Russell 2000 Index Is comprised of the 2000 smallest companies of the Russell 3000 Index, which is comprised of the 3000 biggest companies in the US.   The NASDAQ Composite Index (NASDAQ) is an index representing the securities traded on the NASDAQ stock market and is comprised of over 3000 issues.  It has a heavy bias towards technology and growth stocks.  The STOXX® Europe 600 is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index.  With a fixed number of 600 components, the STOXX Europe 600 represents large, mid, and small capitalization countries of the European region.  The Dow Jones Global ex-US index represents 77 countries and covers more than 98% of the world's market capitalization. A full complement of sub indices, measuring both sectors and stock-size segments, are calculated for each country and region.

Information in this update has been obtained from and is based upon sources that NTrust Wealth Management (NTWM) believes to be reliable; however, NTWM does not guarantee its accuracy. All opinions and estimates constitute NTWM's judgment as of the date the update was created and are subject to change without notice. This update is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities must take into account existing public information on such security or any registered prospectus.
Emerging market investments involve higher risks than investments from developed countries and involve increased risks due to differences in accounting methods, foreign taxation, political instability, and currency fluctuation. The main risks of international investing are currency fluctuations, differences in accounting methods, foreign taxation, economic, political, or financial instability, and lack of timely or reliable information or unfavorable political or legal developments.

The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.  The Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities.  This index aims to provide a broadly diversified representation of commodity markets as an asset class.  The index represents 19 commodities, which are weighted to account for economic significance and market liquidity.  This index cannot be traded directly.  The CBOE Volatility Index - more commonly referred to as "VIX" - is an up-to-the-minute market estimate of expected volatility that is calculated by using real-time S&P 500® Index (SPX) option bid/ask quotes. VIX uses nearby and second nearby options with at least 8 days left to expiration and then weights them to yield a constant, 30-day measure of the expected volatility of the S&P 500 Index.
TIPS are U.S. government securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index (CPI) as a guide, the value of the bond's principal is adjusted upward to keep pace with inflation. Increase in real interest rates can cause the price of inflation-protected debt securities to decrease.  Interest payments on inflation-protected debt securities can be unpredictable.
The NYCE US Dollar Index is a measure that calculates the value of the US dollar through a basket of six currencies, the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the Swedish Krona, and the Swiss franc.  The Euro is the predominant currency making up about 57% of the basket.

Currencies and futures generally are volatile and are not suitable for all investors.  Investment in foreign exchange related products is subject to many factors that contribute to or increase volatility, such as national debt levels and trade deficits, changes in domestic and foreign interest rates, and investors’ expectations concerning interest rates, currency exchange rates and global or regional political, economic or financial events and situations.

Corporate bonds contain elements of both interest rate risk and credit risk. Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income. 

 The bullish percent indicator (BPI) is a market breath indicator.  The indicator is calculated by taking the total number of issues in an index or industry that are generating point and figure buy signals and dividing it by the total number of stocks in that group.  The basic rule for using the bullish percent index is that when the BPI is above 70%, the market is overbought, and conversely when the indicator is below 30%, the market is oversold.  The most popular BPI is the NYSE Bullish Percent Index, which is the tool of choice for famed point and figure analyst, Thomas Dorsey.


Wednesday, September 9, 2015


MARKET UPDATE AND COMMENTARY
September 4, 2015


The summer is over and it has been anything but a quiet time.  Markets have seen volatility surge in the face of a number of different factors and the pundit class has been chattering endlessly trying to explain the first real correction in the markets since 2011.  China appears to be the primary culprit for the recent sell-off along with the continued obsession over the timing and size of a possible rate increase by the Federal Reserve.  Personally, I don’t think anyone really has a full understanding of why markets have corrected, but what I do believe is that the US economy has not fundamentally changed.


Time Period
Dow Jones
Industrial Average
(DJIA)

S&P 500

Russell 2000

NASDAQ
First Quarter 2015
-0.26%
0.44%
3.99%
3.48%
Second Quarter 2015
-0.88%
-0.23%
0.09%
1.75%
Third Quarter to Date
-8.61%
-6.88%
-9.39%
-6.07%
Year-to-Date
-9.66%
-6.69%
-5.69%
-1.10%
Source:  The Wall Street Journal (Past performance is not indicative of future returns).  As of market close September 4, 2015.

I am suspicious about the impact of China on the US economy because China accounts for just 0.7% of the US
Gross Domestic Product (GDP).  Furthermore, I have always been suspicious of any data coming from China because it is a centrally planned and controlled economy.  Chinese leaders have likely cooked the books, and now the government has intervened in a massive fashion to stem the recent free fall in their equity markets.  Where I do believe the Chinese economy is influencing markets is within the emerging market regions whose economies are heavily dependent on the export of commodities.  Slowing demand from China will most likely have a negative impact on these smaller, commodity export-driven economies.  Additionally, the strength of the US Dollar is also hurting the emerging market region because a stronger dollar increases the price of commodities of other countries thus reducing overall global demand.

The Federal Reserve is meeting later this month (September 16-17) and economists are uncertain whether the Fed will start raising rates following this meeting or wait until later in the year, or perhaps even 2016.  The most recent US Employment data pegged the unemployment rate at 5.1%, which would be a signal in
normal market conditions for the Fed to raise rates.  However, we are not living in normal market conditions and thus the uncertainty about the Fed’s actions.  I believe that the Fed should raise rates and a 0.25% increase would be appropriate.  Such a rate increase may even provide some relief to investors by indicating the Fed considers the US economy strong enough to withstand a small rate increase.  I further believe that by starting now, the Fed will be able to increase rates to more normal levels over an extended period of time, and that should be better for markets.  Those calling on the Fed to delay further believe the markets are too fragile to handle this modest rate hike, but I am do not support that view.  For now it is just wait and see.

One final thought on the current volatility in the markets is that the growing dependence on computer algorithms for daily trading activities has probably had a role in the increased volatility.  The easiest way to describe this phenomenon is that one action begets another action, which in turn leads to another.  Computer driven trading can lead to large swings in both directions, and I believe we are seeing this impact on the daily swings in the markets.

Energy (-19%), Utilities (-14%), and Materials (-13%) have been the weakest sectors by far this year.  Only the Health Care (+3%) and Consumer Discretionary (+2%) sectors are positive year-to-date. 

Developed international markets have traded much like markets here in the US.  The European-heavy STOXX 600 has matched the S&P 500 in losses in the third quarter but remains positive for the year based upon a strong first quarter.  As you can see below, the Emerging Markets region has suffered heavily as the demand in commodities has dropped and the US Dollar has strengthened.


Time Period

Global Dow xUS

STOXX 600
Dow Jones
Devel Mkt Region
Total Stock Market
Dow Jones
Emerg Mkt Region
Total Stock Market
First Quarter 2015
3.08%
15.99%
2.23%
1.39%
Second Quarter 2015
-0.17%
0.14%
-0.10%
0.70%
Third Quarter to Date
-11.66%
-6.95%
-8.23%
-19.32%
Year-to-Date
-8.81%
3.58%
-6.27%
-17.63%
Source:  The Wall Street Journal (Past performance is not indicative of future returns).  As of market close September 4, 2015.

US interest rates have trended slightly downward over the past couple of months.  The 10-year US Treasury yield closed last Friday at 2.13% compared to 2.18% at the end of July.  The Barclays US Aggregate Bond Index is up 0.82% for the year while the Dow Jones Corporate Bond Index is up 1.03%.  Bonds have provided some relief as stocks have fallen this quarter.  According to Morningstar® the Bank Loan sector is the best performing bond sector with a year-to-date gain of 1.69%.  The Intermediate Corporate Bond sector, where many investor dollars place funds, is up 0.36%.  As a result of the pullback in equities, especially in the energy sector, the High Yield sector is up 0.30% so far in 2015 after falling 1.49% in the past thirty days.

THE CHALLENGE OF VOLATILITY

Volatility tests investor fortitude.  It can cause the most experienced investors to question the soundness of their investments, and for some it brings back frightening memories of 2008.  It is, however, an unpleasant fact of investing.  I am not spooked and nor should you.

Stocks, bonds, commodities, and currencies fall under the same basic economic tenet of supply and demand
found elsewhere in economics.  When more sellers are in the market compared to buyers, the market falls.  It will continue to fall until investors see attractive values and buyers step in to outpace sellers.  This also helps explain the concept of support.  A support level is that point where buyers have previously stepped in to overwhelm the sellers.  Violating a support level is significant because buyers choose to stay on the sidelines at a point where they had stepped in before indicating negative sentiment.  If that happens we then look for other lower support levels with an eye on judging current buyer sentiment.  The most significant support level for the S&P 500 this year is 1870 reached on August 26th.  Buyers stepped in the next day and pushed averages higher.  Going forward I will be watching this trend carefully, but I am not expecting volatility to diminish.

This is also a good time to revisit some of the research that I have done looking back at daily moves by the S&P 500 over the past 35 years from 1980 to the end of 2014.  Over the 8878 trading days during this period, the market moved up 53.7% of the time and down 46.3% of the time.  The average change per day was 0.75%.  Through 171 trading days so far this year, the market has been up 46.8% of the time and down 53.2%.  This is not a great trend.  Additionally, the average daily change has been just 0.69%.  The third quarter, as you would expect, has been a different story with the average daily change jumping to 0.92%.  There have been 22 up days (46.8%) compared to 25 down days (53.2%) keeping with the general average in 2015.  This should not come as a surprise given the overall decline in market averages, but it is also nowhere near the magnitude of 2008 where the average daily change was 1.7%.

Facts are facts and we remain in a bear market for now, but I do not believe we are experiencing anything more than a typical correction at this time.

LOOKING AHEAD

I believe that we have not seen the last of the volatility in the markets.  I cannot underestimate the impact computer driven trading is having on markets and this is part of trading in 2015.  The exchanges can and have put in periodic delays for some securities to try and stem the influence of computer trading, but there are limits to how effective these moves will be.  Unless you are a day trader, I do not believe this will have a long-term impact on the overall direction of the markets.

I remain committed to the concept of relative strength.  For now, US stocks are favored along with bonds.  The Money Market major asset category sits at number three followed by International stocks, Currencies, and Commodities.  For the more risk averse investors this would indicate that international stocks should be avoided for now.  As I have been saying all year, small and mid capitalization stocks are favored over large caps, and that relative strength relationship has not changed.  Looking at sectors, Health Care, Consumer Cyclical, Technology, and Consumer Discretionary are the strongest on a relative strength basis.  Again, this relationship has been in place most of the year.

As I noted earlier, the Federal Reserve is going to meet a week from now.  There are several key data points due out that are important including Jobless Claims (Thursday), the Producer Price Index (Friday), Retail Sales (next Monday), and Consumer Price Index (next Wednesday).  I highlight these particular reports because they all indicate the potential inflationary pressure building in the economy, and keeping inflation under control is a top priority of the Fed.  Should these reports suggest growing inflationary pressure, I would anticipate the Fed raising rates this month.  However, there are certainly a number of doves on the Fed’s board who are likely to favor holding rates at current levels.  As I said before, I think the Fed should raise rates now in order to space increases over an extended period.

I will conclude my comments by reiterating a point I have made over the past year or so.  The economy is locked into a below average recovery of about 2% GDP growth annually.  We need more growth, but nothing the Fed can do will stimulate growth.  The Fed has certainly done all it can to stimulate the economy since 2009 with minimal impact.  It is now time for pro-growth fiscal policies to be enacted.  For the past six years most of what has come out of Washington are neutral fiscal policies at best and negative more often.  We must incentivise risk-taking, investment, and work.  It is time for our national leaders to step up and make the necessary changes, otherwise the status quo will continue.

If you have any questions or comments, please do not hesitate to reach out to me. 









Paul L. Merritt, MBA, C(k)P®, AIF®, CRPC®
Principal
NTrust Wealth Management

P.S.  If you think this type of analysis would be of benefit to anyone you know, please share this communication with them.

Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be obtained.  Technical analysis is just one form of analysis.  You may also want to consider quantitative and fundamental analysis before making any investment decisions.

All indices are unmanaged and are not available for direct investment by the public.  Past performance is not indicative of future results.  The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors and is a capitalization-weighted index meaning the larger companies have a larger weighting of the index.  The S&P 500 Equal Weighted Index is determined by giving each company in the index an equal weighting to each of the 500 companies that comprise the index.  The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company.  The Russell 2000 Index Is comprised of the 2000 smallest companies of the Russell 3000 Index, which is comprised of the 3000 biggest companies in the US.   The NASDAQ Composite Index (NASDAQ) is an index representing the securities traded on the NASDAQ stock market and is comprised of over 3000 issues.  It has a heavy bias towards technology and growth stocks.  The STOXX® Europe 600 is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index.  With a fixed number of 600 components, the STOXX Europe 600 represents large, mid, and small capitalization countries of the European region.  The Dow Jones Global ex-US index represents 77 countries and covers more than 98% of the world's market capitalization. A full complement of sub indices, measuring both sectors and stock-size segments, are calculated for each country and region.

Information in this update has been obtained from and is based upon sources that NTrust Wealth Management (NTWM) believes to be reliable; however, NTWM does not guarantee its accuracy. All opinions and estimates constitute NTWM's judgment as of the date the update was created and are subject to change without notice. This update is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities must take into account existing public information on such security or any registered prospectus.
Emerging market investments involve higher risks than investments from developed countries and involve increased risks due to differences in accounting methods, foreign taxation, political instability, and currency fluctuation. The main risks of international investing are currency fluctuations, differences in accounting methods, foreign taxation, economic, political, or financial instability, and lack of timely or reliable information or unfavorable political or legal developments.

The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.  The Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities.  This index aims to provide a broadly diversified representation of commodity markets as an asset class.  The index represents 19 commodities, which are weighted to account for economic significance and market liquidity.  This index cannot be traded directly.  The CBOE Volatility Index - more commonly referred to as "VIX" - is an up-to-the-minute market estimate of expected volatility that is calculated by using real-time S&P 500® Index (SPX) option bid/ask quotes. VIX uses nearby and second nearby options with at least 8 days left to expiration and then weights them to yield a constant, 30-day measure of the expected volatility of the S&P 500 Index.
TIPS are U.S. government securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index (CPI) as a guide, the value of the bond's principal is adjusted upward to keep pace with inflation. Increase in real interest rates can cause the price of inflation-protected debt securities to decrease.  Interest payments on inflation-protected debt securities can be unpredictable.
The NYCE US Dollar Index is a measure that calculates the value of the US dollar through a basket of six currencies, the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the Swedish Krona, and the Swiss franc.  The Euro is the predominant currency making up about 57% of the basket.

Currencies and futures generally are volatile and are not suitable for all investors.  Investment in foreign exchange related products is subject to many factors that contribute to or increase volatility, such as national debt levels and trade deficits, changes in domestic and foreign interest rates, and investors’ expectations concerning interest rates, currency exchange rates and global or regional political, economic or financial events and situations.

Corporate bonds contain elements of both interest rate risk and credit risk. Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income. 

 The bullish percent indicator (BPI) is a market breath indicator.  The indicator is calculated by taking the total number of issues in an index or industry that are generating point and figure buy signals and dividing it by the total number of stocks in that group.  The basic rule for using the bullish percent index is that when the BPI is above 70%, the market is overbought, and conversely when the indicator is below 30%, the market is oversold.  The most popular BPI is the NYSE Bullish Percent Index, which is the tool of choice for famed point and figure analyst, Thomas Dorsey.