Market Update - April 17, 2017Submitted by Jodi Vleck , Beta Wealth Group on April 17th, 2017
For the holiday-shortened week ended April 13th, US markets experienced a modest decline due in part to geopolitical concerns including the state of US/Russian relations in the aftermath of the missile strike in Syria, the angst over North Korea and the rumored US deployment of force to quell terrorism in Afghanistan. Also adding to uncertainty was mixed economic data for the week, including weak retail sales, lower inflation readings as evidenced by the consumer and producer price indices as well as continued strength in labor markets. By sector, bond proxies such as Utilities and Consumer Staples led the way with modest gains, whereas more cyclical sectors such as Financials, Materials and Industrials lagged with losses in the 1-3% range. Also contributing to uncertainty were questions around how much of President Trump's stated pro-growth agenda will likely get implemented, given we are nearing the 100-day mark since the current administration took over.
Foreign equities were mixed, with negative returns in Emerging Markets, Europe and Japan translating to flattish-slightly positive results helped by a weaker dollar. Contributing to negative dollar sentiment were Trump's comments about the strong dollar, similar geopolitical concerns that impacted the US markets and the upcoming French elections in late April, where a far-left candidate seems to be gaining around at the expense of centrist and far-right candidates. Within emerging markets, Brazil and Russia were the notable laggards.
US bonds experienced a modest uptick for the week as rates fell across the yield curve, with the 10-year hitting a multi-month low, which boosted long-term treasuries and investment-grade debt, while high yield corporates and floating rate bank loans were flat on the week. Foreign bonds were similarly impacted as well, with the overall flight-to-quality aiding government bonds in the U.K., Japan and Australia, while European bonds were negatively impacted by uncertainty surrounding the French elections.
Finally, real estate markets performed well with U.S. and International REITs gaining ground in part due to a weaker dollar. Within the US, Retail, Industrial and Office REITs led the way, while Apartment REITs lost ground due in part to the normalization of rental rates across several markets as demand and supply approach equilibrium.