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Perspectives from Above the Noise -- Week of March 27th, 2017

Perspectives from Above the Noise -- Week of March 27th, 2017

March 27, 2017

The S&P 500 and Dow Industrials closed Friday with small losses while the NASDAQ Composite eked out a gain after House Republicans, fearing insufficient numbers to pass a healthcare replacement plan, withdrew their legislation shortly before a scheduled vote. The setback cast doubt on the passage of President Trump’s other pro-growth policies, including tax reform and infrastructure spending. Friday’s action sealed the S&P 500 with its largest weekly decline since a 1.9% loss during the week ending November 4th and its second weekly decline this month. The benchmark index ended the week 2.2% below its most recent 2,396 all-time high on March 1, 2017.

For the week, the S&P 500 fell -1.4%, the Dow Industrials declined -1.5%, and the MSCI EAFE (developed international) lost -0.04%.

What We’re Reading

Wall Street Hits Six-Week Lows -- Reuters

Oil Falls on Doubts of More OPEC-Led Cuts -- NASDAQ

Brexit Trigger Set for March 29th -- Herald Scotland

Chart of the Week

World energy equities' relative performance and crude oil prices, 2014-2017

As Chart 1 above illustrates, demand and supply conditions supported higher oil prices earlier this year. Speculative trades in future markets also contributed to crude oil’s rise on expectations that the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC countries would implement agreed-upon production cuts. Nervousness about record levels of speculative trading, rising U.S. supply and growing doubts about production-cut compliance sparked oil’s recent price drop (green line). Global energy stocks (teal line) appear to reflect an even more bearish price outlook, and further unwinding could pressure prices further in the short term.

While oil prices are hard to predict, as production cuts hinge on an uncertain political environment, BlackRock strategists forecast oil to trade mostly sideways over the next few months. This as OPEC members show a disciplined approach in cutting oil production, and U.S. inventory growth may stabilize as oil refiners increase purchases into the spring and summer driving seasons.

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.