Market Update - January 29, 2019Submitted by Jodi Vleck , Beta Wealth Group on January 29th, 2019
During a shortened trading week, U.S. stocks traded about flat following the temporary end to the government shutdown, and amidst hopes for progress in the US-China trade talks. From a sector standpoint, technology and utilities sectors led the way driven by mostly strong earnings results, while energy, staples and consumer goods sectors lagged. During the current earnings season, companies have generally beat expectations, but year-over-year earnings growth has decelerated. On the economic front, weak leading economic indicators and weaker existing home sales offset record-low jobless claims.
Foreign markets outperformed domestic markets, with developed markets eking out small gains but being outpaced by emerging markets. Worries over global trade have been balanced with continued concerns over weaker economic conditions in Europe, notably contraction in German manufacturing. Notably, this was mentioned by ECB president Mario Draghi, who alluded to the possibility for continued loose monetary conditions, which tends to buoy market sentiment. In Emerging Markets, optimism over resolution to U.S. trade issues boosted Chinese stocks, while a slight improvement in economic conditions kept the recent rally intact for EM countries such as Brazil, Turkey and Russia.
U.S. bonds gained some ground, as rates across the yield curve ended slightly lower for the week, while investment-grade corporates and long-term government bonds fared best, outpacing high yield bonds. Emerging market bonds, including both dollar-denominated and local currency bonds outperformed, sustaining a bounce back from terrible sentiment in late 2018. Real Estate Investment Trusts in Europe and the U.K. gained ground on the heels of hints at continued easy monetary policy, and perhaps a coming end to Brexit uncertainty, which has weighed heavily on the London office sector over the past year.
Commodities declined slightly for the week, as gains in industrial and precious metals were outweighed by weakness in energy. After some fluctuation, crude oil ended just slightly below where it started, at just under $54/barrel.