Economic Update 12-02-2019

• In a shortened holiday week, economic data releases included an upward revision for Q3 GDP, stronger durable goods orders, lower jobless claims, and continued mixed but somewhat encouraging results in housing.
• U.S. and foreign equity markets gained last week, with continued optimism about a potential trade deal coming to pass. Bonds were little changed, with U.S. fixed income outperforming foreign. Commodities lost ground overall due to lower prices for crude oil and natural gas.

U.S. stocks ticked higher last week as optimism over a trade deal, or at least a ‘phase one’, looked increasingly promising, as did possible intellectual property protections. Accordingly, despite a low volume week due to the holiday, several equity indexes reached new highs. Tech stocks performed well, with the improved China sentiment, followed by consumer discretionary, with decent early retail numbers for the holiday season. Energy stocks declined in keeping with lower prices for crude oil. Real estate fared well, with gains approaching 2% in the U.S., and a percent internationally, as interest rates remained contained and investors rewarded ‘low vol’ groups.

Foreign stocks gained as well, albeit to a lesser degree than domestic equities. Strength in Europe and the U.K. was offset by declines in Japanese equities. Despite continued close ties to trade, European sentiment continues to see improvement from bottoming levels. Emerging markets were mixed, with countries sensitive to lower oil prices generally experiencing a poorer week than those that aren’t. Protests in several South American nations, including Chile and now Columbia, have affected market sentiment; however, the market cap of those nations remains quite small in the context of global equity market impact. (Latin American equity indexes themselves are generally dominated by Brazil, with Mexico second-largest.)

U.S. bonds were little changed on the week, as the yield curve by only a few basis points. Long duration governments and high yield offered returns slightly higher than broader bond indexes. Foreign developed market bonds were little changed, while emerging market local bonds lost nearly a percent.

Commodities generally lost ground, as weakness in the energy complex outweighed minimal changes elsewhere. The price of crude oil fell by over -4% to just over $55/barrel, surpassed by a -15% correction in natural gas prices due to forecasts for warmer weather ahead to break the cold snap.

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. 

FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO THE PUBLIC WITHOUT PRIOR APPROVAL FROM YOUR RESPECTIVE FIRM’S COMPLIANCE DEPARTMENT