Market Update - November 21, 2017Submitted by Jodi Vleck , Beta Wealth Group on November 21st, 2017
For the week ended November 17th, U.S. stocks experienced mixed performance despite sharp early-week volatility with small cap performance comfortably overshadowing that of their large cap peers. By sector, consumer discretionary and consumer staples companies led the way with gains of over a percent, helped by a strong showing from Wal-Mart, while energy stocks lost the most ground during the week followed by industrials as oil prices lost ground. The week featured strong economic data including robust retail sales, strong manufacturing and industrial production data alongside low jobless claims numbers, and increasing doubts about the future of the tax-reform bill where the House and Senate versions differ markedly.
Foreign stocks reported mixed performance, with negative returns in Europe and Japan aided somewhat by a weaker dollar when translated into local currency terms, following weaker-than-expected earnings. Similar to developed markets, a weaker dollar turned smaller emerging markets market gains into stronger returns when translated into US dollars, with strength in Brazilian markets offsetting weakness in Chinese and Russian markets. Overall, the recovery occurring in foreign markets continues to chug along forcing economists and market strategists to revise their global growth forecasts higher over the next couple of years.
U.S. bond indices rose especially on the investment-grade front, as rates declined on the longer end of the yield curve while inching a bit higher on the shorter-end of the yield curve, in keeping with expectations for the Fed to move rates higher in December following recent benign economic data. While most investment-grade bonds inched higher, high yield bonds lagged with largely flat returns consistent with more recent weakness. Developed market foreign debt performed similarly to domestic bonds, although a weaker dollar propelled gains when translated into US dollars, while emerging market debt posted strong returns overall.
Real estate markets in the U.S. declined slightly, with residential real estate markets suffering while mortgage REITs and mall REITs bounced back after treading water recently. Commodity indices lost ground despite the weaker dollar, with energy/industrial metals/agriculture sectors losing ground, due in part to concerns around global demand.