Economic Update 11-28-2016

• During a shortened Thanksgiving week, durable goods orders came in stronger than expected, which buoyed hopes for business capex spending.  In real estate, home prices and existing home sales both showed continued growth.

• Stock markets in the U.S. ended with positive returns again, with several all-time highs reached in a variety of both large- and small-cap indexes.  Bonds were mixed as interest rates ticked upward a bit, but at a slower pace than prior weeks.  Commodities were slightly higher as industrial metals experienced gains, but oil declined slightly.

On a holiday-shortened week, the Dow surpassed another magical milestone of 19,000 and the S&P 500 reached another all-time high, with continued optimism about a Trump administration being able to stimulate economic growth.  By sector, telecom led the way, followed by materials, while healthcare lagged as the only group seeing a decline for the week.  Higher-beta small caps again beat out large-caps, resulting in impressive year-to-date gains.

Foreign stocks also gained for the most part, with, net of currency effects, U.K. providing the strongest returns followed by Europe.  Sentiment appeared to be partially driven by positivity in the U.S., although a bit tempered by political uncertainty, including Italy’s upcoming constitutional referendum on Dec. 4, designed to significantly streamline government, although opinions on the matter remain mixed in regard to the law itself and whether it goes far enough.

U.S. bonds lost ground slightly as interest ticked upward in the middle of the yield curve but remained unchanged on the long end.  Investment-grade governments and corporates performed generally in line, while high yield and floating rate bank loans bucked the trend with positive results.  Foreign bonds were flattish in local terms, but a slightly stronger dollar turned these results into losses.

Real estate also experienced gains, in keeping with broader equities, led by economically-sensitive segments industrials and lodging.  Foreign REITs in Asia and Europe also came in with positive returns.

Commodities gained slightly overall.  Early in the week, crude oil gained several percent on increased (again) optimism for OPEC to tighten production at their upcoming Nov. 30 meeting, but fell back to earth by Friday to $46 as enthusiasm for some sort of deal again dissipated; natural gas, on the other hand, gained sharply.  Industrial metals copper, nickel and zinc gained sharply on growing demand, while ‘safe haven’ precious metals lost a few percent again as investors sought out risk assets instead.

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.                                                                            

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.