Market Update - November 19, 2018Submitted by Jodi Vleck , Beta Wealth Group on November 19th, 2018
U.S. stocks experienced a negative week with most major indices falling ~2% for the week, as negative sentiment toward former bellwethers in technology continued, including concerns over future prospects for Apple and Amazon. However, markets were whipsawed in both directions, with hopes for a trade deal with China offsetting negative sentiment due to threats of further automotive tariffs. From a sector standpoint, materials and telecom led the way, while technology, consumer discretionary and energy names were the notable laggards.
Foreign stocks in developed markets posted declines, while equities in emerging markets such as China, Brazil and India all ended the week with strong gains as investors appeared to rediscover bargains in the region. Japanese markets lost ground, as third quarter GDP came in a bit worse than expectations at -1.2%, negatively affected by weather, lower exports and poor consumption. U.K. markets experienced among the worst losses in keeping with a weaker pound, as the release of the highly anticipated Brexit withdrawal agreement came alongside political turmoil, with cabinet members continuing to resign amidst disagreement over underlying terms. Parliament has yet to approve the agreement, which could likely be described as a ‘soft Brexit’ scenario, as opposed to the other options of no agreement (or ‘hard Brexit’) or even referring the matter to a second referendum, with neither of these scenarios appearing ideal.
U.S. bonds gained due to flows back into fixed income, leading rates about 0.10% lower across the longer end of the yield curve. Treasuries fared best while spreads widened, which punished investment-grade corporates, high yield and floating rate bank loans. Foreign bonds gained in developed markets due to a weaker dollar, with an especially robust week in emerging market local debt, which rose nearly a percent.
Real estate markets in the US gained slightly, with help from lower interest rates, while foreign REITs were generally flat, with the exception of the U.K., which fell in keeping with pound weakness. Commodities were mixed as metals and agriculture gained slightly, while energy overall lost ground. The price of oil continued to decline beyond correction territory, with both fears of slowing demand and higher supplies taking their toll. West Texas Intermediate Crude fell nearly 6% on the week to end at just under $57/barrel, although Saudi Arabia announced plans for a cut in exports to stem the decline.