Market Update - November 19, 2019Submitted by Jodi Vleck , Beta Wealth Group on November 19th, 2019
For the week ended November 15th, US equity markets posted a strong showing though it started on a rough note as protests in Hong Kong escalated, resulting in violence and further uncertainty about governmental response from China. Continued optimism about a ‘Phase one’ deal between the U.S. and China that the administration has promised was ‘close’ and Fed Chair Jerome Powell reiterating the current stabilization in fiscal policy after three interest rate cuts, both provided stability underlying market action. Defensive sectors such as Utilities, Health care and Consumer staples provided the strongest returns, gaining over a percent, while the Energy sector lagged, with the sector down a percent. On the economic front, positive retail sales and regional manufacturing data offset higher-than-expected consumer and producer price inflation.
Foreign equities offered mixed results with most markets generally lagging the U.S, with broader indices in the Eurozone and U.K. ending the week on a slightly positive note, while Japanese stocks lost ground. Perhaps importantly from a sentiment standpoint, German Q3 GDP growth came in at a positive 0.1%, Europe overall grew at a 0.2% rate which ended up slightly better than expectations and the U.K. grew 1.0% which was a better than expected considering Brexit worries. Emerging markets suffered with losses in China over 3% driven by weak economic data points involving industrial production, retail sales and fixed asset investment, all of which were impacted by the continuing impact of trade wars.
U.S. bonds recovered a bit of ground as interest rates fell across the yield curve by 10 basis points, with longer duration government bonds and investment-grade corporates providing the strongest gains, while high yield bonds and and bank loans rose to a lesser degree. Foreign developed market debt benefited from lower rates and a slightly weaker dollar, while emerging market debt performance was mixed.
Commodities were mixed on the week, featuring strength in energy and precious metals while industrial metals lost several percent, as fears of economic slowing remained persistent. Crude prices rose over a percent to just below $58/barrel, which was offset by natural gas prices falling over 3%.