Market Update for Quarter Ending December 31st, 2017

 

Market Update for the Quarter Ending December 31, 2017

Presented by S. Lisa Hayes CFP©, ChFC, AIF©

 

Solid December caps strong year for markets

U.S. financial markets were strong throughout 2017 and capped off the year with even more gains in December. All three major indices were up for the month and the quarter. In December, the Dow Jones Industrial Average led the way with a return of 1.92 percent. The S&P 500 Index gained 1.11 percent, and the Nasdaq Composite trailed with a gain of 0.48 percent. For the quarter, the Dow also led the way, up 10.96 percent. Again, it was trailed by the S&P 500 at 6.64 percent and the Nasdaq at 6.55 percent. For the year, however, the Nasdaq claimed the top spot with an impressive gain of 29.64 percent. It was followed by the Dow, up 28.11 percent, and the S&P 500, up 21.83 percent. All three indices remained supported technically at year-end, trading well above their 200-day moving averages.

This positive performance was driven largely by improving earnings growth. According to FactSet, as of year-end, the estimated fourth-quarter earnings growth for the S&P 500 was 10.9 percent, with all 11 sectors projected to grow from third-quarter levels. If we get this level of growth—and analysts have made much smaller downward revisions than usual—it would mark the highest level of annual earnings growth for the S&P 500 since 2011. As fundamental performance ultimately drives long-term returns, this would be a boon for investors.

 International markets also had a successful year. The MSCI EAFE Index, which tracks developed markets, gained 1.61 percent for December, 4.23 percent for the fourth quarter, and 25.03 percent for the year. The more volatile MSCI Emerging Markets Index returned 3.64 percent for the month, 7.50 percent for the quarter, and a whopping 37.75 percent for the year. Like U.S. markets, international markets closed the year with strong technical support, trading well above their trend lines.

Fixed income had a more volatile year than equities, as early outperformance was offset by rising rates. The Federal Reserve (Fed) increased the federal funds rate three times in 2017. Although these rate hikes are indicative of the Fed’s confidence in the ongoing economic expansion, rising rates can hit fixed income markets—and that is exactly what we saw. Markets currently anticipate two to three rate hikes in 2018, which could have similar effects.

Despite the rate hikes, the Bloomberg Barclays Aggregate Bond Index gained 0.46 percent in December, bringing the quarterly return back to 0.39 percent and capping the annual return at 3.54 percent. The Bloomberg Barclays U.S. Corporate High Yield Index had similar returns of 0.30 percent and 0.47 percent for the month and quarter; however, a stronger start to the year left the index with an annual return of 7.50 percent.

 Consumers drive economic growth

The economic news in December was good pretty much across the board, but the best news came from the ever-important consumer. Shoppers helped the year end with a bang, as high confidence translated into much better-than-expected spending heading into the holiday season. Retail sales, which had lagged confidence all year, surprised to the upside, with headline and core sales both increasing by 0.8 percent over October’s figures. On an annualized basis, retail spending growth now sits at 5.8 percent, the highest level since 2012 (see Figure 1). This recovery in spending has been a long time coming, and seeing it is a positive sign.

Figure 1. Retail Sales Annualized Change, 2007–2017

Another positive sign is continued high levels of consumer confidence, which could spark further spending gains. The Conference Board’s consumer comfort survey hit a 17-year high in November. Although confidence pulled back a bit in December, it remains at very high levels historically.

Strong job growth also supports confidence and spending. In November, 228,000 jobs were added against expectations for a more modest increase of 200,000. The underlying data was also strong. The unemployment rate remained unchanged at 4.1 percent, and the average hours worked per week increased, indicating strong demand for labor. The one fly in the ointment was wage growth, which came in at 0.2 percent against expectations for stronger growth. Although wage growth remains muted, the tight labor market and healthy growth of the economy indicate that this may be an area where we see faster growth in 2018.

Finally, the strength of the housing market points to healthy consumer sentiment. Homebuilder confidence increased again in December to levels last seen in 1999. This increased confidence translated into more housing starts, which now sit at the second-highest annualized growth level since 2008. Homebuilder confidence has been driven, and matched, by buyers. Both existing and new home sales beat expectations last month, with existing sales growing 5.6 percent and new home sales rocketing up 17.5 percent. Some of this growth is still likely due to the effects of the hurricanes in the third quarter, but the overall strength of the housing market should not be dismissed.

Businesses also confident—and spending

Sentiment remained strong for businesses last month, as industry surveys remained in healthy expansionary territory across the board. Supported by this confidence, business investment spending also registered solid growth. Durable goods orders increased by 1.3 percent in November, offsetting a decline in October. Core orders, which exclude volatile transportation expenditures, declined slightly, but that was offset by a positive revision to October’s strong growth.

Finally, business output was also solid in November. Both industrial production and manufacturing output grew by a steady 0.2 percent. Although this headline figure may not jump off the page, it comes on top of a very strong gain in October following a rebound from the hurricanes.

Persistent political risk looms over markets

As was the case for much of 2017, the major source of risk to the markets remains political. International risks include the ongoing Brexit process, as the United Kingdom and the European Union negotiations continue, as well as the continuing attempts to form a German government. In Asia, North Korea remains a major risk factor, with war a very possible outcome.

Here in the U.S., the passage of tax reform removes one source of risk, but we still face a new deadline to avoid a government shutdown in the middle of January. With both parties locked into confrontational modes, and with significant policy differences at stake, political risk remains substantial—and could rock markets. The markets largely ignored politics in 2017, but we can’t assume we will be that lucky in 2018. The biggest risk here is that politics might damage the confidence that is driving growth.

2018 starts with lots of momentum

With high confidence, continued job growth, and likely increase in wage growth, consumers enter 2018 in good shape. Similarly, with high confidence, increasing spending, and improving economic fundamentals, the business sector looks likely to keep growing. Combine all that with reduced regulation and the possible positive impact of tax reform, and we could see even faster growth in 2018. At a minimum, we certainly enter the year with a great deal of momentum.

Although politics will likely continue to dominate the news cycle, strong fundamentals should keep driving the economy and markets forward. More volatility is quite likely, though, possibly at worrying levels. The calm of 2017 is unlikely to last through 2018, and we need to remember that markets can go down as well as up. As always, a well-diversified portfolio that matches investor goals and time horizons and takes advantage of long-term growth opportunities remains the best path forward.

 

All information according to Bloomberg, unless stated otherwise.

 Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

For IARs: (S. Lisa Hayes CFP©, ChFC, AIF©) is a financial advisor located at (Creative Financial Planning, 101 South Broadway South Nyack, NY 10960).  She offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. She can be reached at 845-634-6050 or at Lisa.Hayes@creativeplanners.net

Authored by Brad McMillan, senior vice president, chief investment officer, and Sam Millette, fixed income analyst, at Commonwealth Financial Network®.

 

© 2018 Commonwealth Financial Network®

Market Update for the Month Ending November 30th

Market Update for the Month Ending November 30, 2017

Presented by S. Lisa Hayes CFP®, ChFC, AIF®

 Another strong month for markets

Both domestic and international stock markets had another good month in November. Here in the U.S., the Dow Jones Industrial Average led the way with a gain of 4.24 percent. The S&P 500 Index and Nasdaq Composite followed with returns of 3.07 percent and 2.34 percent, respectively. All three indices hit all-time highs during the month.

Gains were driven by improving fundamentals. According to FactSet, as of November 24, the blended earnings growth rate for the S&P 500 for the third quarter was 6.3 percent. This was up from the estimate of 4.7 percent at the end of October and more than double the 3.1-percent estimate at the end of the quarter. Improvements were widespread, with 8 of 11 sectors beating their September estimates. As fundamentals ultimately drive performance, the better-than-expected results helped propel stocks to record highs. From a technical standpoint, all three U.S. indices remained above their 200-day moving averages for the month—a signal of probable continued strength.

International markets also moved up in November, although they didn’t do as well as U.S. markets. The MSCI EAFE Index rose by a solid 1.05 percent for the month. As was the case in the U.S., this positive performance was driven primarily by improving earnings growth and general economic expansion. There was some volatility earlier in the month due to political drama in Germany. The strong fundamentals allowed the index to recover by month’s end, however.

Emerging markets, as measured by the MSCI Emerging Markets Index, improved by 0.21 percent in November. Volatility was likewise an issue during the month, tempering gains. Despite their troubles, both foreign indices remained above their 200-day trend lines.

November was more difficult for fixed income, as yields on the short end of the curve increased in anticipation of a rate hike and the potential for a government shutdown in December. The Bloomberg Barclays U.S. Aggregate Bond Index declined by 0.13 percent in November. High-yield faced similar headwinds, with the Bloomberg Barclays U.S. Corporate High Yield Index falling by 0.26 percent. Looking forward, the market expects the Federal Reserve to hike the federal funds rate by 25 basis points at the December meeting.

Economic news to be grateful for

November’s economic releases were generally positive, with notable improvements across the board. Following the disruptions caused by the hurricanes in the third quarter, job creation in October rebounded from negative headline figures with a print of 261,000 new jobs. The details of the report were also strong: unemployment and underemployment both declined, and wages held constant. This performance, following dampened results in September, shows the continued strength of the job market.

It is not surprising, therefore, that consumer confidence climbed during the month. The Conference Board’s consumer confidence survey was especially positive. A greater-than-expected increase to 129.5 left this measure at a 17-year high heading into the important holiday retail season.

Although consumer confidence figures have been high since last year’s election, hard spending data has fallen short of sentiment. Not so for the latest retail sales report. The headline figure grew, against expectations for a flat month. September’s figures also were revised upward. Combined, this news paints a picture of solid if not spectacular growth in the fourth quarter.

Businesses also experiencing growth

The positive results for consumer confidence and spending were echoed by similar results for businesses. Manufacturing confidence, as measured by the Institute for Supply Management’s Manufacturing index, declined slightly to 58.2—a still healthy number that indicates ongoing expansion. The Nonmanufacturing index performed better, increasing to 60.1 against expectations for a decline to 58.5. As the service sector accounts for the majority of economic activity, this increase to a 12-year high is a very positive signal.

Here as well, better sentiment was accompanied by improvements in actual spending. Core durable goods orders—which exclude the volatile transportation sector and are a better proxy for business investment—increased by 0.4 percent in October. In addition, the strong September figure was revised upward. Core business spending has shown solid growth this year compared to last year (see Figure 1), and growth is currently close to a five-year high. This is important, as this has been a weak area in the expansion.

Figure 1. Change in Core Durable Goods Orders, Year-Over-Year (2013–2017)

The housing industry also had a strong month. Here, again, improvements in industry sentiment were matched by additional investment. Homebuilder confidence rose during the month to an eight-month high, as strong consumer demand and rising prices continued to offset the high costs of labor and materials. The supply of new and existing housing stock remains near historic lows. This, coupled with strong demand, has kept the industry confident.

Consumer demand came in much better than expected, with existing home sales growing at 6.2 percent, against expectations for a decline of similar proportions. On an annualized basis, the level of new home sales is the highest it has been since October 2007. Builders have started to react to low supply levels, with both housing starts and building permits increasing by more than double their expected growth rates for the month. As long as consumer demand remains strong, builders are expected to continue to invest in new construction, which will be positive for the economy.

With consumer, business, and housing spending all increasing, faster growth is quite possible for the second half of the year. In fact, the second estimate of third-quarter gross domestic product growth came in at 3.3 percent, up from the initial estimate of 3 percent. If this level holds, it will mark the first two consecutive quarters of growth above 3 percent that we’ve seen since 2014.

The rest of the world is growing as well. European growth continues to improve, with several countries growing faster than the U.S. Meanwhile, growth in China remains solid, and even Japan has started to improve. This is the first synchronized global growth cycle we have seen since the crisis, which could help all countries around the world.

Political risks remain elevated

With the economic news good, the major source of risk remains political. In Europe, the inconclusive German election and stalled coalition talks rattled European markets mid-month and still have the potential to create more uncertainty. The ongoing Brexit process in the U.K. is also creating concern. Looking to Asia, North Korean nuclear tests continue to destabilize the region.

The immediate political risks, however, are here in the U.S. The two major stories highlighting the rest of the year are tax reform and the debt ceiling. If tax reform passes, it could be positive for the markets. But that passage is uncertain—and that uncertainty could create volatility.

Of more concern is the potential government shutdown in early December. The current debt ceiling agreement expires on December 8. Without a new agreement between Republican and Democratic lawmakers, the government will shut down. Although the most likely outcome remains some sort of agreement, a shutdown—with all the uncertainty and turmoil that implies—remains a very real possibility.

Markets remain strong

The good thing about the political risks, however, is that the economy is in good shape to weather them. With the combination of economic growth, earnings growth, and high confidence likely to lead to faster growth for the second half, any political disruption will be cushioned by the strong economy. This, combined with the potential for passage of a business-friendly tax bill, signals that we may see faster growth over the next couple of quarters than we have for some time.

If not, market volatility is very possible. But even then, any short-term shocks should be offset by the strong economic and corporate fundamentals. As always, a well-diversified portfolio matched to your risk tolerance remains the best way to meet your financial goals over the long term.

All information according to Bloomberg, unless stated otherwise.

 Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

 

Lisa Hayes CFP®, ChFC, AIF® is a financial advisor located at Creative Financial Planning, 101 South Broadway, South Nyack, NY 10960. She offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. She can be reached at 845-634-6050 or at lisa.hayes@creativeplanners.net

 

Authored by Brad McMillan, senior vice president, chief investment officer, and Sam Millette, fixed income analyst, at Commonwealth Financial Network®.

 

© 2017 Commonwealth Financial Network®

Market Update for the Quarter Ending June 30, 2017

Presented by Lisa Hayes, CFP®, ChFC, AIF®

Mixed returns in June cap strong second quarter
U.S. markets led the way in June. Large-cap equities did well even as technology stocks ran into turbulence. The Dow Jones Industrial Average and S&P 500 Index posted solid gains of 1.74 percent and 0.62 percent, respectively. But the Nasdaq suffered from weakness in technology and finished the month down 0.87 percent.

Quarterly results were better. The S&P 500 was up 3.09 percent, and the Dow gained 3.95 percent. Despite its slight pullback in June, the Nasdaq did best, climbing 4.16 percent. Year-to-date, the Dow and S&P 500 have risen a strong 9.34 percent and 9.35 percent, and the Nasdaq has gained an impressive 14.71 percent. The three indices remain strong on a technical basis as well. All remained above their 200-day moving averages for the quarter, ending the first half of 2017 near all-time highs.

Earnings growth continues to support the stock market. After strong earnings growth in the first quarter, the second quarter looks good, too. According to FactSet, as of June 30, the S&P 500’s estimated earnings growth rate for the second quarter is 6.6 percent. This figure is slightly lower than the number anticipated at the end of the first quarter but may be good enough to drive stocks higher. Analysts expect nine sectors to show earnings growth.

International equity markets experienced a similar month and quarter. The MSCI EAFE Index, which represents the stocks of developed markets, declined 0.18 percent in June. But it managed a total return of 6.12 percent for the quarter. The MSCI Emerging Markets Index fared better, posting a 1.07-percent return for the month and a 6.38-percent gain for the quarter. Year-to-date, the EAFE is up 13.81 percent, and emerging markets have soared 18.60 percent. Technicals have been healthy for the two major international indices as well. Both remained above their trend lines for the month and quarter.

The renewed earnings growth and a supportive economic environment have driven the strong market performance year-to-date. The current synchronized global economic expansion is the first since the financial crisis, and it should continue to support faster growth.

Results for fixed income markets were mixed. The Federal Reserve (Fed) interest rate increase—though expected—forced market adjustments. The Bloomberg Barclays Aggregate Bond Index declined 0.10 percent in June, as the rate on the 10-year Treasury rose from 2.21 percent at the beginning of June to 2.31 percent by month-end. Longer-term results were better. The index returned 1.45 percent for the second quarter and is up 2.27 percent year-to-date.

The Bloomberg Barclays U.S. Corporate High Yield Index performed better for the month, gaining 0.14 percent in June and 2.17 percent for the quarter. The high-yield market remains popular; spreads are near post-recession lows, supporting returns. Default rates are still below historical average levels.

Economic data supports growth
First-quarter gross domestic product growth (GDP) was stronger than the initial estimate. The figure was revised upward, to 1.4 percent, which is double the original 0.7-percent estimated rate.

Positive revisions to consumer consumption numbers were the major drivers of the improved GDP rate. Consumption rose from an initial estimate of 0.3-percent growth to a robust 1.1-percent increase. The revisions, as well as the recent trend of weak first quarters to be followed by stronger subsequent quarters, represent a good start to the year.

Second-quarter data is also looking positive. Consumer income and spending rose 0.4 percent in April, and the figures for March were revised upward. Solid job and wage growth engendered the good results.

Data toward the end of June was less positive. Income growth has been strong, but spending growth has declined to 0.1 percent. This is actually better than it looks. The drop was due to lower gas prices—an overall positive—and moderating auto sales, which is a continued adjustment down from very strong previous sales levels. Combined with the decline in inflation, these factors seem to indicate that the decrease in spending may not be a concern yet.

The May jobs report was also weak, with only 138,000 jobs created. This figure was well below expectations, although the unemployment rate fell to its lowest level in 16 years. The slowing pace of job growth may be due to a lack of qualified job seekers, not a lack of jobs. Indicators point to job growth picking up; so, again, this situation is not yet a concern.

Despite some weak data, the Fed remains positive about the outlook for the economy. It raised the federal funds rate 25 basis points at its June meeting. The increase was anticipated and largely interpreted as a sign of continued confidence.

Housing rebounds following a weak April
Perhaps the most encouraging data for the quarter came from the housing sector. Some results for May were stronger-than-expected and offset a slight slowdown in April. Existing home sales in May were up 1.1 percent, though analysts had forecast a decline. New home sales also increased by more than expected for the month. The upticks were notable given the low level of supply on the market—existing housing stock is at its lowest level since 1982. Supply is expected to remain tight.

Home builder confidence dropped unexpectedly in May, as did housing starts and building permits. These declines were of some concern—especially given the low levels of housing supply. They could indicate that building costs are increasing.

Healthy demand drove the strength in housing. The S&P/Case-Shiller U.S. National Home Price Index showed that home prices had surpassed pre-recession highs (see Figure 1). Sales have continued to increase despite all-time highs in prices. This signals that many consumers are confident enough in the economy to make a long-term investment.

Figure 1. S&P Case-Shiller U.S. National Home Price Index, 2000−2017

Business and consumer sentiment still strong
The largely positive hard data reported in June was bolstered by continued strength in business and consumer sentiment. Business confidence remained high in May. This was reflected in the surprise increase in the ISM Manufacturing Index, which analysts had expected to remain flat.

Core durable goods orders, which are a proxy for business confidence, increased slightly during May. And although the ISM Non-Manufacturing Index was down for the same period, this measure is still in healthy expansionary territory.

Consumer confidence is still high, despite a small pullback in some surveys in June. The Conference Board Consumer Confidence Survey declined slightly, yet its three-month average is at the highest level since 2001. The high levels of confidence are providing a solid tailwind for continued growth.

Political risks remain
As has been the case for much of the year, politics continue to add uncertainty to the markets. The major domestic concern has been the Republican effort to reform heath care. To add to the uncertainty, the fate of wide-ranging tax reform is partially tied to the success of the administration’s health care efforts. Republican lawmakers are looking to use savings from health care reform to offset potential revenue losses from corporate and personal tax cuts. At this point, expectations are low, so the downside risk is probably low as well. There may be some upside potential if Congress is able to move forward.

Internationally, political risks remain. But given the better-than-expected results from recent European elections, these seem less pressing than earlier in the year. Progress has been made in dealing with economic issues. For example, the Italian banking system has started to resolve some of its problems. Market volatility could still arise from upcoming Italian election results and a worsening of the situation with North Korea.

Strong first half is a good sign for the rest of 2017
Risks remain and there have been signs of slowing growth, but the outlook for the U.S. economy is positive. High levels of confidence combined with increasing income and spending bode well for second-half growth. And, as growth speeds up in the rest of the world, the U.S. should benefit.

The positive outlook notwithstanding, we are bound to see volatility in the short and intermediate terms. A well-balanced portfolio designed to match objectives and hedge against the inevitability of less positive conditions in the future remains the best means to achieve financial goals.

All information according to Bloomberg, unless stated otherwise.

Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

Lisa Hayes is a financial advisor located at Creative Financial Planning, Inc., 101 South Broadway, South Nyack, NY 10960. She offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. She can be reached at 845-634-6050 or at lisa.hayes@creativeplanners.net.

Authored by Brad McMillan, senior vice president, chief investment officer, and Sam Millette, fixed income analyst, at Commonwealth Financial Network®.

© 2017 Commonwealth Financial Network®