Market commentary, 3rd Quarter 2016


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Investors continued to be confident in an indefinite low rate environment as central bankers reaffirmed their commitment to unconventional monetary policy. U.S. stocks were up 3.85% as continued evidence of improvement in the labor market was not enough to convince the Federal Reserve to raise rates before the November election. Despite commodities being down in the quarter, Emerging Market stocks were up 9.03% as lower rates in major economies prompted investors to seek assets with higher risk and return potential. In another attempt to combat sustained low inflation, the Bank of Japan announced it would suppress 10-year yields to 0% until inflation remains above 2% for an extended time. Mutual fund investors decreased their holdings in stocks while increasing their holdings in bonds. For the quarter, stocks had a net outflow of $19.7 billion and bonds had a net inflow of $86.7 billion. Total money market mutual fund assets decreased by $38 billion to $2.7 trillion. Total employment increased by 451,000 jobs this quarter, although the unemployment rate rose slightly from 4.9% to 5.0% as workers re-entered the labor market. The price of oil was flat at $48 a barrel through the quarter.

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