Market Update - April 12, 2019Submitted by Jodi Vleck , Beta Wealth Group on April 15th, 2019
For the week ended April 12th, 2019 U.S. stocks gained a bit with earnings season slowly beginning and core inflation levels coming in contained. By sector, financials led by gaining 2%, as the yield curve again moved in a positive-sloping direction, as well as positive earnings results from JPMorgan to begin the Q1 earnings season; just behind were gains in communications, led by sharp gains in Disney, which rolled out a new streaming service; and technology. Bringing up the rear was health care, which lost over -2% due to Congressional debate over the future of Obamacare (or some other plan). The uncertainty component over payment structures and possible caps for areas such as prescription drugs have not been kind to health care stocks in the past.
Foreign stocks were largely flat on the week, which, after adjusting for a weaker dollar, translated to gains in line with U.S. equities. The European Central Bank left interest rates unchanged, largely as expected, due to downside risks of economic growth in the region persisting. The deadline for a Brexit agreement was extended by the EU until October, although markets seemed largely unfazed. Overall, sentiment continues to be driven by global economic growth news, including downgrades in 2019 growth numbers by the IMF by a few tenths of a percent overall and in most key regions, weakness in Chinese auto data last week, as well as tariff bickering between the U.S. and Europe, despite stronger hopes for a deal between the U.S. and China. Emerging markets were mixed, with profit taking in China and weakness in Turkey following presidential scrutiny of recent local election results.
U.S. bonds lost ground overall as interest rates ticked higher on stronger recent economic news. While the 3 month to 5 year treasury spread continues to be inverted, 10-year and longer treasury levels are positively sloped versus short-term bonds. Credit fared better, as spreads tightened, led by high yield and floating rate debt, which outperformed all others for the week. Foreign bonds were helped by a weaker dollar in developed markets, while emerging market bonds were again mixed.