Market Update - September 18, 2017Submitted by Jodi Vleck , Beta Wealth Group on September 18th, 2017
For the week ended September 15, U.S. equities gained about 2% across most major market indices and a broad variety of sectors despite no notable positive catalysts but with the market shrugging off aggressive political rhetoric from North Korea and hurricane damage reports from recent hurricane-hit regions; this was accompanied by strength in most developed foreign markets although the moves were a bit tempered due to the negative impact of a stronger dollar. Small caps sharply outperformed large caps, which ran counter to year-to-date trends. From a sector standpoint, energy stocks gained over 3% on the back of stronger oil prices, accompanied by strong returns from financials, telecom and materials sectors, while the utilities sector lagged modestly. On the economic front, slightly improved jobless claims data was offset by disappointing retail sales data, weaker consumer sentiment and higher consumer/producer price inflation.
U.S. bonds suffered negative returns for the week on the heels of a risk-on really, driving yields higher across the yield curve, with investment-grade credit holding up better than treasuries and high yield bonds bouncing back. On the other hand, developed market foreign bonds lagged due to higher yields and the headwind of a stronger dollar, while emerging market bonds suffered less due to a more-manageable currency impact. Commodities gained for the week, as energy prices rose sharply.
Foreign equities had mixed performance largely due to currency effects, while Japanese stocks gained 3% in local currency terms on the back of stronger economic data although a weaker yen moderated much of these gains. On the other hand, losses in the U.K. markets turned into positive returns as a result of a stronger pound. Also, emerging market equities outperformed developed market equities, featuring strength in China despite slowing growth and Brazil also experiencing gains despite more controversy surrounding the president indictment regarding corruption charges.
Real estate investment trusts (REITs) gained modestly, underperforming broader equity markets, despite the impact of higher interest rates. Cyclically-sensitive lodging and regional mall REITs bounced back sharply, while apartment REITs lost ground. On the other hand, Asian and European REITs lagged with negative returns.
Commodities rose for the week, led by strength in the energy sector, with crude prices rising 5% to $50ish/barrel, driven by expected inventory drawdowns and talk of the Saudi-led OPEC agreement to extend production cuts beyond March of next year.