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Perspectives from Above the Noise -- Week of April 10th, 2017

| April 10, 2017
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U.S. stocks flipped between small daily gains and losses before ending the week fractionally lower as markets proved resilient amid rising geopolitical tensions. Bond prices advanced for a fourth week and gold and oil futures rallied after the U.S. launched a cruise missile strike against a Syrian air base. President Trump said the base had been used for planes involved in a chemical weapons attack which killed dozens of Syrian civilians earlier in the week. The attack escalated America’s role in Syria and drew criticism from Syrian President Bashar al-Assad and his allies, including Russia and Iran. Also causing Wall Street angst, just 98,000 new jobs were created in March, the fewest since May 2016 and was just half the level projected by Wall Street economists. It was noted that the soft U.S. payrolls report was, in large part, due to disruptions from March winter storm Stella that dumped 10” - 20” of snow in the upper Midwest and Northeast.

For the week, the S&P 500 fell -0.24%, the Dow Industrials dipped -0.03%, and the MSCI EAFE (developed international) slipped -0.66%.

What We’re Reading

U.S., China Agree on N. Korea Threat -- CNN

Credit Recouples with Oil Prices -- Bloomberg

Tesla Surpasses GM by Market Cap -- Bloomberg

Chart of the Week: Wall Street Displays Resiliency on Syria

Investors awoke last Friday to the startling news that the U.S. had bombed a Syrian military airbase in retribution for the chemical gas attack on its own people. Ahead of the opening bell, futures pointed to steep declines, and early trading sent the S&P 500 down nearly 3%. So yet again— as has been the case for bull-market shocks since WWII— investors sold first and asked questions later. As more news reports clarified the situation, initial fears evolved, and cooler-headed concerns turned to questions like “will this event escalate and ultimately lead to a recession?” And since the consensus view was “likely not,” investors began buying back in, paring sharp early morning declines on the S&P 500 to only 0.08% by the end of the day.

As Chart 1 illustrates, in 13 bull-market shocks since WWII, the S&P 500 fell an average 2.4% on the day of the shock, and slipped a total of 4.5% before bottoming out only nine calendar days later and getting back to breakeven in 18 days. This time around, the recovery could be a lot quicker as investors re-focus on a more imminent issue of interest: the start of the first quarter 2017 earnings reporting season, which currently points to overall S&P 500 earnings improvement just below 10%.

Some materials are chosen by the Cetera Investment Management team and summarized by Jason Vitucci who is not affiliated or registered with Cetera. Cetera Investment Management provides investment management and advisory services to a number of programs sponsored by First Allied Securities and First Allied Advisory Services. Cetera Investment Management individuals who provide investment management services are not associated persons with any broker-dealer. International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.

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