Weekly Economic Update

Economic Update 6-17-2019

 

  • Economic data for the week included generally as-expected reports for retail sales, producer prices and consumer prices, retail sales and industrial production came in higher than expected, while consumer sentiment and labor figures disappointed a bit.
  • Global equity markets were relatively flat on net for the week, with U.S. stocks ending slightly in the positive, and foreign slightly in the negative. Bonds experienced similar results, with the yield curve little changed, upon few changes in investor risk preferences. Commodity markets were characterized by lower prices for crude oil offset by sharp price gains in the grains complex.

U.S. stocks ticked just a bit higher on the week, with less volatility than over recent weeks. Over the prior weekend, an agreement between the U.S. and Mexico regarding immigration policy resulted in a pullback on the previously-announced threat of tariffs, boosting market sentiment early in the week, with one of the potential trade hurdles removed. Several announced mergers, such as United Technology’s proposed acquisition of Raytheon, also seemed to boost market sentiment. By sector, consumer discretionary stocks led with gains over 2%, followed by communications and utilities, while energy and industrials lagged with losses approaching a half-percent.

Foreign stocks ended the week similarly to those in the U.S., although a percent gain in the value of the U.S. dollar (mostly versus the euro and pound) pushed net returns into the negative. Returns in the Eurozone, U.K. and Japan were all in fairly close alignment, while emerging markets fared much better, with gains in Russia, China and Mexico, which offset a weaker Brazil and India. Gains in the Far East appeared to be driven by hopes for further Chinese government stimulus.

U.S. bonds experienced minimal change for the week, although investment-grade corporates and high yield outperformed treasuries to a small degree. Overseas, a stronger dollar punished net returns for developed market debt (which carries a minimal coupon in many countries to offset currency price declines), while emerging market bonds were mixed as local currency debt interestingly outperformed USD-denominated.

Commodities broadly were flat on the week, with strength in agricultural commodities wheat, corn and soybeans (helped by terrible flooding across swaths of the U.S. that has delayed or prohibited crop planting) offset by lower pricing for petroleum. The price of crude oil declined by a few percent to nearly $52.50/barrel, to remain within its recent range. Despite the bombing of several tankers in the Persian Gulf, attributed to the Iranian Republican Guard, that again increased regional tensions, a report by the International Energy Agency of far lower global growth in oil demand, as well as continued reports of large U.S. stock piles, outweighed in terms of sentiment.

 

 

 

 

Period ending 6/14/2019 1 Week (%) YTD (%)
DJIA 0.46 13.18
S&P 500 0.53 16.29
Russell 2000 0.58 13.60
MSCI-EAFE -0.26 10.83
MSCI-EM 0.76 5.11
BBgBarc U.S. Aggregate 0.02 5.20

 

U.S. Treasury Yields 3 Mo. 2 Yr. 5 Yr. 10 Yr. 30 Yr.
12/31/2018 2.45 2.48 2.51 2.69 3.02
6/7/2019 2.28 1.85 1.85 2.09 2.57
6/14/2019 2.20 1.84 1.85 2.09 2.59

 

 

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. 

 

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