Risk Off Dominates on Dollar Strength; Global Weakness

Stocks continued to move lower last week as global growth affected investor sentiment.  The S&P 500 experienced its worst weekly performance in over two years as the index slid -3.1%. Small caps, as measured by the Russell 2000, dropped -4.7%.

Since January of this year, major indexes have exhibited four meaningful selling episodes which were triggered from varying events. The first downturn came late in January followed by mid-April, and again in early August. The most recent selling began in late September. Partly to blame for this year’s first attempt at a correction was a disappointing January jobs number, but we believe a more plausible reason was profit-taking after the 30% gain in 2013. Next, stocks weakened in mid-April as investor’s anxiously waited for first-quarter reporting. Earnings were better than expected and stocks quickly rebounded. The weakness in July into August was the first [of this year] geo-political trigger; international turmoil, including Malaysian Air Flight 17 being shot down and ISIL conquering huge swaths of Iraq and Syria. As these international events receded, stocks resumed their upward climb and successfully recorded all time highs.

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