Market Update - November 28, 2017Submitted by Jodi Vleck , Beta Wealth Group on November 28th, 2017
On a Thanksgiving-shortened week with no notable political news or updates on the tax reform bill, U.S. equities experienced strong gains led by continued strong sentiment for technology stocks followed by consumer discretionary and industrial names, while defensive sectors such as utilities and consumer staples lagged to end the week about flat. Over the coming weeks, we should expect to see updates on the tax front, with the Senate version of the tax bill under review and up for vote, and more than a few GOP senators expressing doubt about passage of the bill in its current form. The coming week or two will likely add more legislative drama, with the Senate’s version of the tax bill under review and up for potential vote. The economic front saw mixed reports, with slightly weaker durable goods orders more than offset by strong existing home sales and jobless claims numbers.
Foreign stocks generally underperformed U.S. equities in local currency terms, with a weaker dollar pushing returns higher for both developed and emerging markets, as growth in Europe remained at its strongest relative levels in over a decade. Emerging markets outperformed driven by strong results from the BRIC nations with the exception of China, where governmental tightening of financial conditions to spur credit risk reduction carried over into slightly bearish sentiment for equities. Turkish markets were among the worst performers as the nation’s president criticized its central bank for keeping interest rates high to combat high inflation, while in Germany, the process for forming a new government continues as Merkel’s conservative party is pursuing a coalition with the Social Democrats after talks fell apart with the green and pro-business parties. Expectations remain high for a status quo outcome, with more progressive fringe groups on the edge not likely to gain enough support to cause much political disruption.
U.S. bonds experienced slight gains as long-term interest rates ticked down a bit to further flatten the yield curve. Longer-term government bonds and investment-grade corporates fared best as did high yield bonds, while developed and emerging market foreign bonds performed similarly in local currency terms with the weaker dollar pushing returns about a percent higher.
Real estate markets ticked slightly higher in the U.S., with gains in mortgage REITs (real estate investment trusts) offset by weakness in retail/mall REITs, while European and Asian real estate markets fared better on the back of a weaker dollar. Commodity indices gained alongside a weaker dollar, with crude oil rising nearly 4% to the highest levels since June 2015, driven partly by the controversial Keystone pipeline shutting down due to an oil leak, which could potentially reduce the availability of crude supplies in the US.