U.S. stocks rose this week, with the S&P 500 Index gaining for the ninth week out of the past ten. Stocks rallied late in the week in anticipation of a “phase one” trade deal with China and the removal of a tariff hike scheduled for December 15. A verbal agreement was reportedly reached on Friday. Investor sentiment was also lifted by United Kingdom (U.K.) election results and Federal Reserve (Fed) communications. Economic data was mixed. Gross domestic product (GDP) grew 2.1% in the third quarter thanks to a 20 basis point (0.2%) upward revision in inventories, according to revised data. The Conference Board’s Consumer Confidence Index slid for a fourth straight month in November, but the gauge remained elevated historically. Orders for nondefense capital goods (excluding aircraft), a proxy for capital expenditures, jumped the most in nine months in October, according to preliminary data.
Economic data was mixed overall this week, though it is notable that the Fed characterized the U.S. economy in more upbeat terms. The core Consumer Price Index, excluding food and energy prices, grew a manageable 2.3% year over year, while core producer price inflation fell to a three-year low. Holiday distortions drove a jump in weekly jobless claims that could soon reverse. Retail sales missed expectations, but rose 0.2% in November following an upwardly revised 0.4% increase in October.
Global stocks rose last week, led by emerging markets amid progress on trade and a weaker U.S. dollar. The MSCI EAFE Index of developed market stocks rose 0.4% through Thursday, led by Germany, France, and the U.K. European markets got a boost Friday following U.K. Prime Minister Boris Johnson’s convincing election victory. The MSCI Emerging Markets Index gained more than 2% over the first four days of the week, led by China, South Korea, and Taiwan.
The Russell 2000 Index of small cap stocks trailed the large cap stock benchmarks for the week after outperforming the prior two weeks. The growth style of investing outperformed value slightly on technology sector outperformance and weakness in real estate and utilities.
The 10-year U.S. Treasury yield climbed to a one-month high on Thursday before dropping on Friday, as details of a U.S.-China trade agreement dampened risk appetite. The Bloomberg Barclays U.S. Aggregate Bond Index fell during the week through Thursday. Credit-sensitive fixed income outperformed, with emerging markets debt and high-yield corporate bonds leading returns.
The U.S. dollar fell for the second consecutive week as both the euro and British pound rallied amid U.K. elections and central bank meetings on both sides of the pond. Oil prices broached the $60 per barrel mark on trade progress and last week’s OPEC production cuts, before finishing the week just under that level.
Industrial metals outperformed precious metals, with copper delivering a second straight strong week to bring its two-week gain to more than 4%. Gold garnered support from a weak U.S. dollar and moved higher despite the market’s preference for riskier assets. The price of gold has traded in a range of less than 3% over the past five weeks.
Next week the U.S. economic calendar will deliver preliminary December Markit Purchasing Managers’ Index (PMI) data on Monday and industrial production on Tuesday. Housing data is on tap for Tuesday and Thursday, and the November update for the Leading Economic Index (LEI) will be released on Thursday. Revised Q3 2019 gross domestic product and consumer confidence will come out on Friday, December 20.
Internationally, investors will evaluate Eurozone manufacturing survey data on Monday, followed by a Eurozone inflation report on Wednesday and the Bank of Japan’s policy decision on Thursday. November data from China is also expected next week, including capital investment, industrial production, and retail sales.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance the products or strategies discussed are suitable for all investors or will yield positive outcomes. All performance referenced is historical and is no guarantee of future results. The economic forecasts set may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Sector data is represented by S&P 500 GICS sub-indexes.
Because of its narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.
U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. They are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
For a list of descriptions of the indexes referenced in this publication, please visit our website at lplresearch.com/definitions.
This research material has been prepared by LPL Financial LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL is not an affiliate of and makes no representation with respect to such entity.
If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are:
Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed |
Not Bank/Credit Union Deposits or Obligations | May Lose Value
Tracking # 1-927586