Market Update - September 23, 2019Submitted by Jodi Vleck , Beta Wealth Group on September 23rd, 2019
For the week ended 09/20, U.S. equities ended the week slightly down partly driven by the news that China had canceled a Montana trip where related officials were supposed to have visited a group of farmers. This news may have likely had more impact on market direction relative to the Federal's reserve 25 bps rate cut, Monday's spike in crude oil due to attacks on Saudi Arabia's oil infrastructure and disruption in the short-term borrowing (or repo) markets which forced intervention by the Fed. By sector, defensive groups such as utilities and healthcare outperformed, along with the energy sector in part due to higher oil prices; conversely, sectors such as consumer discretionary and industrials lagged for the week, with the latter presumably more affected by higher energy prices. On the economic front, industrial production and housing sales numbers were strong which offset declines in regional manufacturing indices.
Foreign stocks performed generally in line with domestic equities with the exception of emerging markets, which lagged. Hopes for a UK-EU Brexit deal continue to persist, although odds of a deal or ‘no deal’ outcome in coming weeks are fairly even, with the Irish backstop remaining a sticking point. Emerging Market performance was led by weakness in China, Turkey and South Africa, with several economic indicators such as Industrial Production and Retail Sales in China clearly impacted by damage from the current trade spat which undermined sentiment.
U.S. bonds gained ground during the week as interest rates dipped across the yield curve, in keeping with negative sentiment on risky assets and the Federal Reserve’s quarter-point rate cut. Investment-grade corporates fared best for the week, while high yield bonds lagged. Strength in the dollar held foreign developed bonds back, while emerging market bonds were again mixed: USD-dollar denominated bonds gained nearly 2% while local currency debt was flat.
Real estate markets bucked broader equity trends but kept pace with defensive sectors, by gaining over a percent for the week. Foreign real estate markets provided similar returns to those in the U.S with gains in European markets being offset by losses in Asian markets. Commodity indices rose broadly due to the overwhelmingly positive influence of energy, with the price of crude oil spiking 10% early during the week following the Saudi attack, but optimistic expectations for getting the oil infrastructure back online by month-end resulted in the price of crude oil rising by only 6% for the week to just over $58/barrel.