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The year 2016 likely will be remembered for the election of Donald Trump as the 45th president of the United States and the Brexit vote.  This year also saw the Fed raise interest rates for the first time since last December, noting that the labor market has continued to strengthen and that economic activity has been expanding at a moderate pace since midyear.  While inflation remains below the Fed's target of 2.0%, the Committee expects inflation to rise to its target level over the medium term on the heels of anticipated improvements in energy and import prices and continued labor strengthening.  Equities began the year hitting the skids as receding oil prices and a plummeting Chinese stock market pushed stock prices down and bond prices up.  By midyear equities had recovered, despite Great Britain's decision to exit the European Union.  Following the results of the presidential election, stocks surged to new highs.  Whether this trend continues in 2017 remains to be seen following President-elect Trump's first few months in office.
 
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The Markets

The economy picked up the pace in November, as did the stock market.  After getting off to a sluggish start durinig the early part of the month, equities soared following the results of the presidential election.  Each of the indexes listed here reached record highs during the month.  The Russell 2000 posted the largest monthly gain, reaching double digits.  Energy stocks jumped at the end of the month following OPEC's agreement to cut production.  Investors seemed willing to sell bonds and buy stocks as evidenced by the yield on 10-year Treasuries, which jumped 56 basis points by the end of the month and now exceeds their 2015 closing yield.  Gold lost value, closing November at $1,174.80, down $103 from its October closing value of $1,277.80.
 
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Market Month November 2016

Indiana Trust & Investment Management Company
September 19, 2016
 

Back in July of 2014 the U.S. Securities and Exchange Commission (SEC) issued new rules for money market mutual funds. The rules establish new definitions for government funds and retail funds and require certain money market mutual funds, including institutional municipal money market funds, to price and transact at a “floating” or variable Net Asset Value. Under these new rules the institutional municipal money market funds may charge shareholders liquidity fees as well as provide for “redemption gates,” meaning a temporary halt on all withdrawals from the respective fund. The implications for these new rules are such that shareholders could now experience losses if the per-share value of the fund decreases below a lower limit threshold. A caveat to these new rules is that Government and U.S. Treasury money market mutual funds will not be subject to any of the new structural changes and thus will not be subject to fees, gates, or a floating Net Asset Value.

The implementation process for these rules has spanned several years and the final implementation date is set for October 14, 2016. Based upon how Indiana Trust Company utilizes money market funds within the broader structure of portfolio management, earlier this year we made an adjustment to the core money market position in taxable accounts by opting to replace the Northern Trust Municipal Money Market with the Northern Trust Government Select Money Market. Due to the fact that all U.S. Treasury and government money market funds are exempt from these structural reforms, we feel that this change is in the best interest of our clients.

If you have any questions about the aforementioned money market mutual fund reform or any other issues where we can assist then please do not hesitate to contact us. As always, we appreciate your business and the opportunity to help with your financial goals.

 

The Markets

The second quarter provided a bumpy ride for investors.  Following the upheaval caused by the Brexit vote in June, July kicked off the third quarter by ending the month in favorable fashion, as each of the indexes listed here posted month-to-month gains, led by the Russell 2000 (5.90%) and the Nasdaq (6.60%).  Stocks held their own for July, despite falling energy shares, as crude oil prices (WTI) sank from around $49 per barrel to under $42 by the close of July.  As money moved into equities, bond yields remained on the low side as the yield on 10-year Treasuries remained below 1.60%, closing July at just about where it started at 1.45%.
 
The dog days of summer saw light trading in August, but that didn't stop the markets from moving sharply.  By the middle of the month, the Dow, S&P 500, and Nasdaq had surged to all-time highs -- the first time since 1999 that all three indexes reached a new high at the same time.  Yet by the end of August, each of the indexes listed here saw their values fall back to about where they were at the beginning of the month.  The large-cap Dow and S&P 500 fell ever so slightly from July's closing values, while the Russell 2000 and Global Dow posted modest gains for the month.  Crude oil fell below $40 per barrell during the month, but rebounded to close the month at about $45 per barrel.  Bond prices fell as the yield on 10-year Treasuries reached 1.60%.
 
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Market Month September

The Markets

With no Federal Open Market Committee meeting and little news to jar the markets, the lazy, hazy days of August seemed to lull investors into a state of lethargy.  Trading was light and volatility, limited.  Despite the fact that several of the indexes tracked here posted new highs during the month, weekly changes shifted up and down within a narrow range.  The month's end saw mixed results, with large caps losing whatever momentum they had gained, while technology, small caps, and international stocks posted respectable monthly gains.

Long-term bond yields also showed limited movement over the month, ending 13 basis points higher than where they started.  The price of gold (COMEX) slumped, selling at $1,312.20 -- about $46 lower than July's closing price of $1,357.90.

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Market Month August