Market Update - February 12, 2019Submitted by Jodi Vleck , Beta Wealth Group on February 11th, 2019
For the week ended February 8th, U.S. equity markets were flattish as early-week optimism again tapered off due to skepticism about the signing of a broad-based U.S.-China trade agreement, and fears that slowing global growth could seep into the US economy. For now, markets are keying off of White House economic advisor Larry Kudlow's comment that there remained a ‘pretty sizable distance’ between the U.S. and China from a trade deal standpoint, with President Trump commenting that he would likely not be meeting with the Chinese Premier Xi prior to the March 1 trade deal deadline, when tariffs were set to increase from 10% to 25%. By sector, utilities, information technology and industrials all gained over a percent, while the energy and materials sectors ended the week in negative territory, in keeping with lower commodity prices. On the economic front, the release schedule was light with weakening ISM non-manufacturing data and stronger-than-expected jobless claims.
Foreign stocks markets and ended the week lower, partly on concerns about slowing European economic growth and driven by a stronger dollar. For the first time in several weeks, developed markets outperformed emerging markets in local currency terms, although on a USD-adjusted basis, the relative performance was comparable. While trade concerns continued to dominate investor minds, the European Union's lowered growth forecasts, going from 1.9% to 1.3% for 2019, caught investor attention as did the Bank of England's lowered growth forecasts amidst ongoing uncertainty over the Brexit process. Flattish returns in local currency for both developed and emerging markets translated into negative returns after accounting for a sharply stronger dollar.
U.S. bonds fared well as interest rates ticked down again during the week, with investment-grade credit outperforming government bonds slightly, although long-duration (20+ year) treasuries fared well. Commodities overall declined by over a percent, with most sub-groups such as precious and industrial metals, as well as crude oil and natural gas suffering losses. Crude price fell nearly 5% during the week to below $53/barrel, as concerns of slowing demand consistent with weaker global economic growth were further exacerbated by higher supplies.