Market Update - December 4, 2018Submitted by Jodi Vleck , Beta Wealth Group on December 4th, 2018
For the week ending November 30, U.S. stocks recovered sharply and this erased much of the losses in the week prior. The most noteworthy catalyst mid-week came from the Federal Reserve Chair Jerome Powell's dovish speech which acknowledged risks in the economy, and suggested that interest rates are fairly close to neutral levels at which the economy will neither overheat nor slow drastically. Additionally, positive sentiment surfaced from hopes of a U.S.-China trade agreement at the G20 meeting, which proved prescient since the U.S. announced a two-month postponement of trade escalation until March, and China agreed to resume selected purchases of agricultural, industrial and energy products. Of course, this rally might be short-lived unless both China and the US take concrete steps to resolve trade conflicts, since a full-on trade war poses risks to global growth. From a sector standpoint, healthcare/consumer discretionary/technology sectors led the way, while consumer staples and materials sectors lagged. On the economic front, stronger housing prices offset weaker sales metrics & an increase in jobless claims.
Foreign market returns were also positive but less buoyant than those in the U.S, with emerging markets outperforming Europe, U.K. and Japan In the U.K., an upcoming vote on the Brexit deal is slated for December 11, with odds of passage continuing to fluctuate weekly. In China however, sentiment appears to be seeing some bottoming with hopes rising for a long-term trade agreement with the US, and the government putting through a variety of stimulus measures to help stem the recent growth slowdown. Robust emerging market returns were scattered across a variety of Emerging Market nations, including India, South Korea and Turkey.
U.S. bonds rose slightly as bond yields continued to tick downward, partially due to renewed hopes that interest rates will not rise as fast as initially feared; high-yield corporates fared better than treasuries which outperformed investment-grade corporates. While the dollar gained some ground during the week, foreign developed and emerging market debt posted strong weekly returns.
Commodities were mixed on the week, with agriculture experiencing the strongest gains followed by energy, while safe haven precious metals fell back due to the movement toward risk assets. Crude oil experienced a quieter week than recently, rising about a percent to close just under $51/barrel.