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Current Monthly Market Recap
Hello, and welcome to the State Farm market recap audio broadcast. Each month, we offer a perspective on recent events impacting the financial markets in the U.S. and abroad.
This is the recap for the month of September 2013.
Global equity markets rallied across the board in September, as the U.S. Federal Reserve decided to maintain its monetary stimulus program, and economic growth in China and Europe showed signs of strengthening. For the month, both the U.S. and international equities markets posted positive returns.
Now lets first review the U.S. equities markets.
In the U.S., stocks advanced to new all-time highs during the month despite investor concerns over the potential government shutdown and the looming political standoff over raising the U.S. debt limit. For the month, the Standard & Poors 500 Index®, a benchmark for the U.S. equity market, reached an all-time high of 1725 on September 18th and closed out the month with a 3.1 percent total return. Small-cap stocks, as represented by the Russell 2000 Index, and mid-cap stocks, as represented by the Russell MidCap Index, also posted positive returns for the month, gaining 6.4 percent and 4.6 percent, respectively.
Nine of the ten sectors comprising the S&P 500 Index climbed higher for the month, with the more economically sensitive sectors outperforming the more defensive areas of the market. For the month, industrials, consumer discretionary, and materials led the S&P sectors higher, gaining 5.7 percent, 5.4 percent and 4.4 percent, respectively. Dividend-paying sectors continued to be affected by rising interest rates, with the utilities sector posting a 1.1 percent total return, while telecommunication services was the only sector to decline, losing -0.5 percent for the month.
For the longer 1-year time period, small-capitalization stocks led the major stock indices in total returns gaining 30.1 percent, followed by mid- and large-cap stocks posting total returns of 27.9 percent and 19.3 percent respectively. During 2013, all three of the major stock indices have recorded new all-time highs and are securely in positive territory for the year-to-date, 1- and 5- year time periods.
Lets now turn our attention to the foreign equities markets.
Global equity markets rebounded in September after a modest pullback in August. European stocks posted strong gains as the 17-nation euro zone continued to emerge from recession and solidify its economic recovery. A couple of Europes most economically troubled countries, Spain and Greece, led the developed markets higher, each posting gains of 14.3 percent for the month. For the month, the Morgan Stanley Europe, Australasia, and Far East Index gained 7.4 percent, while emerging markets, as measured by the MSCI Emerging Markets Index, also advanced posting a 6.5 percent total return.
Japanese stocks continued their upward momentum in September despite investor concerns over the decision by the Japanese government to raise the countrys sales tax from 5 percent to 8 percent, starting April of 2014. With Japanese national debt close to 245 percent of gross domestic product (GDP), the government has been challenged with trying to incorporate some level of fiscal rehabilitation while continuing to maintain its economic revitalization efforts. Year-to-date, Japan led the developed countries in total returns advancing 24.3 percent. For the longer 1-year time period, developed international markets (excluding the U.S.) have advanced 16.1 percent, while emerging international markets have gained 1.0 percent for the period.
Lets now switch our focus to the U.S. fixed income markets.
U.S. fixed income markets moved back into positive territory supported in part by a surprise move by the U.S. Federal Reserve to maintain its monetary stimulus program. For the month, U.S. investment-grade bonds, as measured by the Barclays U.S. Aggregate Bond Index, advanced 1.0 percent. Over the longer 1-and 5-year time periods, the Barclays U.S. Aggregate Bond Index has posted annualized total returns of -2.5 percent and 4.9 percent, respectively.
The U.S. municipal bond market ended September in positive territory after experiencing four consecutive months of negative returns. For the month, the Barclays Municipal Bond Index® gained 2.2 percent, and partially recovered from its previous months losses to end the quarter down -0.2 percent. Over the longer 1- and 5-year time periods, municipal bonds have posted annualized total returns of -2.2 percent and 6.0 percent, respectively.
Interest rates declined in September as investors sought out the relative safety of U.S. Treasuries, driven in part by the anticipated government shutdown and the looming debt ceiling deadline. At month end, the yield on the benchmark 10-year Treasury note closed at 2.64 percent down 0.14 percent from August month ending 2.78 percent. Meanwhile, the 30 Treasury Bond closed the month at 3.69 percent compared to 3.70 percent at August month end.
With that, we will conclude this broadcast. Thank you again for listening to the State Farm Market Recap. Please join us again next month for the latest market review.
In August of 2011, Congress failed to reach an agreement to raise the debt limit until the last moment, and stocks dropped by more than 15 percent. How will the financial markets respond if agreements cant be reached by this years October 17th deadline? Tune in next month to find out.
Securities through registered representatives of State Farm VP Management Corp., One State Farm Plaza, Bloomington, Illinois 61710-0001, 1-800-447-4930.
This recap has been prepared by State Farm VP Management Corp. for informational purposes. The information contained herein has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. Any opinions discussed herein reflect our judgment as of the date of publication and are subject to change without notice. This material should not be considered a recommendation to purchase or sell any security.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 21 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
Mutual Funds Disclosures
It is not possible to invest directly in an index.
The Russell 2000® Index tracks the common stock performance of the 2,000 smallest U.S. companies in the Russell 3000® Index
The Russell 2500 Index tracks the 2,500 smallest companies in the Russell 3000 Index.
The Russell 1000 Index is a stock market index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index.
The Russell Midcap Index measures the performance of the mid-cap segment of the US equity market and is a subset of the Russell 1000 Index.
The Dow Jones Industrial Average is an unmanaged average of 30 actively traded stocks.
The NASDAQ Composite is an unmanaged market capitalization weighted index that is designed to represent the performance of the National Market System.
The S&P 500® Index tracks the common stock performance of 500 large U.S. companies.
The S&P 1500 Index is a stock market index of U.S. stock that includes all stocks in the large cap S&P 500 Index, the mid cap S&P 400 Index, and the small cap S&P 600 Index.
The Morgan Stanley Capital International Europe, Australasia and Far East Free (EAFE® Free) Index currently measures the performance of stock markets of Europe, Australia, New Zealand, and the Far East.
The Morgan Stanley Capital International Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe.
The Barclays Capital 1-5 Year U.S. Treasury Index measures the performance of short-term U.S. Treasury Securities maturing within one to five years.
The Barclays Capital U.S. Aggregate Bond Index represents debt securities in the U.S. investment grade fixed rate bond market.
The Barclays Capital Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market.
The Barclays Capital High Yield Index includes all fixed income securities having a maximum quality rating from Moodys Investor Service of Ba1, a minimum amount outstanding of $100 million, and at least one year to maturity.
The Barclays Capital TIPS Index measures the performance of the US Treasury Inflation-Protected Securities (TIPS) market.
The Citigroup 3 Month T-Bill Index is an average of the last 3-month Treasury bill issues (excluding the current month-end bill).
The FTSE EPRA/NAREIT Developed REIT and Non-Reit Index is a subset of the Developed Index, which is designed to track the performance of listed real estate companies and REITS worldwide.
The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
The Nikkei 225 Index is a price-weighted index comprised of Japans top 225 blue-chip companies on the Tokyo Stock Exchange.
The Credit Suisse High Yield Index is designed to mirror the investible universe of the $U.S. Denominated high yield debt market.
Standard & Poors®, S&P®, S&P 500®, Standard and Poors 500, and 500 are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by State Farm Life Insurance Company, State Farm Life and Accident Assurance Company and the State Farm Variable Product Trust. Neither the Large Cap Equity Index Fund nor the Stock and Bond Balanced Fund is sponsored, endorsed, sold or promoted by Standard & Poors, and Standard & Poors makes no representation regarding the advisability of investing in the Large Cap Equity Index Fund or the Stock and Bond Balanced Fund.
The Russell 2000® Index is a trademark/service mark, and Russell is a trademark of the Frank Russell Company. The Small Cap Equity Index Fund is not sponsored, endorsed, sold or promoted by, nor in any way affiliated with the Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed the Small Cap Equity Index Fund nor any associated literature or publications and Frank Russell Company makes no representation or warranty, express or implied, as to their accuracy, or completeness, or otherwise.
The EAFE® Free Index is a trademark, service mark and the exclusive property of Morgan Stanley Capital International, Inc. (MSCI) and its affiliates and has been licensed for use by the State Farm Variable Product Trust (the Trust). The International Equity Index Fund (the Fund), based on the EAFE® Free Index, has not been passed on by MSCI as to its legality or suitability, and is not issued, sponsored, endorsed, sold or promoted by MSCI. MSCI makes no warranties and bears no liability with respect to the Fund. MSCI has no responsibility for and does not participate in the management of the Fund assets or sale of the Fund shares. The Trusts Prospectus contains a more detailed description of the limited relationship MSCI has with the Trust and the Fund.
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