Market Update - November 28, 2016Submitted by Jodi Vleck , Beta Wealth Group on November 28th, 2016
On a holiday-shortened Thanksgiving week, the Dow surpassed the 19,000 milestone and the S&P 500 reached another all-time high with both indices up about 1.5% for the week, fueled by continued optimism about a Trump administration being able to stimulate economic growth, despite no specifics around his economic plans going forward. By sector, telecoms led the way, followed by materials, while healthcare lagged as the only group declining for the week. Higher-beta small caps again beat out large-caps, continuing their torrid run since the election end, and their impressive year-to-date gains. On the economic front, durable goods orders were robust spurring hopes for higher business capex spending, and home prices/existing home sales showed continued growth.
Foreign stocks also gained ground in local-currency terms, with the U.K. markets providing the strongest returns followed by the rest of Europe. Positive sentiment appeared to be partially driven by positive momentum in the US markets, although this was a bit tempered by political uncertainty, surrounding events such as Italy’s upcoming constitutional referendum on Dec. 4, which is designed to significantly streamline the government, though views around investment implications are fairly mixed.
U.S. bonds lost a little ground as rates ticked upward around the middle of the yield curve but remained unchanged on the long end of the curve. Investment-grade governments and corporates performed generally in line, while high yield and floating rate bank loans bucked the trend with positive performance. Foreign bonds were flattish in local currency terms, but a slightly stronger dollar turned these results into losses in dollar terms.
Real estate sector also experienced gains, in keeping with broader equities, led by economically-sensitive segments such as Industrial and Lodging REITs. Foreign REITs, domiciled in Asia and Europe, also came in with positive returns.
Commodities gained slightly overall, with crude oil up several percent on increased (again) optimism that OPEC would tighten production at their upcoming November 30 meeting, but crude fell back to earth by Friday as enthusiasm for a deal again dissipated. Industrial metals such as copper, nickel and zinc gained sharply on growing demand, while ‘safe haven’ precious metals lost ground again as investors sought out risk assets.