Market Update - December 6, 2017Submitted by Jodi Vleck , Beta Wealth Group on December 6th, 2017
For the week ended December 1st, U.S. stocks rose sharply with the S&P 500 up 1.5% and the Dow Jones Index experiencing one of the best weekly returns of the year. From a sector standpoint, telecom and financials led the way with 6% and 3% returns respectively, while the technology sector experienced some profit taking and potentially the start of a sector rotation as it lost ground by 2%. Overall, market sentiment was strengthened by a rather sedate, market-friendly confirmation hearing of newly-nominated Fed Chair Jerome Powell, as well as the anticipation of passage of the Senate’s version of the tax bill. With several notable differences between the House and Senate bills however, the next two weeks should focus on bridging said gaps above and on preventing a government shutdown since the ongoing resolution to continue government funding currently expires on Friday, Dec. 8. On the economic front, upward revisions in 3rd quarter GDP numbers and strong housing metrics more than offset a slight dip in the ISM manufacturing index.
Foreign stocks posted modest declines across almost all primary developed market regions. Despite European manufacturing PMI readings coming at their highest levels in over 17 years, inflation came in much lower than expected. Emerging markets suffered sharper losses with many of the larger BRIC markets posting declines, although it is debatable whether this is due to profit taking or changes in internal fundamentals which we believe have not notably changed.
U.S. bond market returns were flattish on the week, with short rates falling and intermediate-term rates rising while long-term treasuries were unchanged. Developed and emerging market foreign bond returns were modest in local currency terms, but appeared worse off when translated into dollar terms. Rates in the U.K. continued to rise as Brexit negotiations have been largely on target, and odds of another central bank rate hike have increased.
Real estate assets declined both in the U.S. and abroad. In domestic markets, retail/regional mall real estate investment trusts (REITs) gained a few percent consistent with better-than-expected prospects for the holiday shopping season, while apartment REITs gave up ground. Commodity indices declined for the week led by drops in crude oil prices as well as in industrial and precious metals.