Last Week’s Economic/Market Summary – April 29, 2019
Data
U.S. equity benchmarks were mostly positive on the week.[1]
The Nasdaq led to the upside with a gain of 1.9% while the Dow Jones Industrial Avg was down.1
The All-Country World Index rose 0.28%.1
S&P 500 sub-sectors were mixed last week.
Healthcare led to the upside by a wide margin with a gain of 3.6%.1
Energy & Materials led to the downside.1
The CBOE Volatility Index (VIX) moved higher to end at 12.7.1
US Treasury yields moved lower last week.
The difference (spread) between the 2yr & 10yr increase for the 3rd week in a row.1
Bond yields were down in Europe and Asia.1
Commodities as an aggregate asset class declined by 1.5%.1
WTI Crude was down 1.2%.1
Gold rose 1%.1
The US Dollar index rose 0.6%.1
In our opinion, U.S. economic data was mixed last week.
The National Activity Index came in at -0.15% for March. 1
New home sales in March exceeded expectations. 1
1st quarter US GDP came in well ahead of expectations at +3.2%.1
An index of equities outside the U.S. (MSCI EAFE) lost more than 0.50%.1
Conclusion
US equity indices ended the week mostly positive as perceived economic strength in the US and solid earnings reports from mega-cap companies contributed to this week’s upside.
S&P 500 +1.2%; Dow Jones -0.06%; Nasdaq +1.90%; Russell 2000 +1.66%.[1]
The Dow Jones Industrial Average was weighed on by a small number of large, globally oriented companies such as Intel, Caterpillar, & 3M which all moved lower with poor earnings reports.2
Interesting to note that on 3M’s earnings call, CEP Michael Roman mentioned weakness in China, automotive, & electronics as explanations for 3M’s poor performance.2
The All-World ex-US equity index moved in a different direction than most domestic indices last week as it sank by more than 0.50%.2
This continued a recent trend of performance divergence between US stocks & Int’l shares.
We believe this can be attributed in large part to the strength of the US Dollar relative to the Euro and various Emerging Market currencies.
Chinese equities had their worst week in 6 months as they lost 5.6%.2
Monetary policymakers there seemed to express a desire to control the recent massive rise in speculative risk taking across asset markets.
In simple terms, we believe the recent Chinese stimulus has been mostly funneled into purchasing investable assets with leverage as opposed to purchasing tangible goods or investing in job creation and/or infrastructure.
S&P 500 sub-sectors subsectors were mixed last week.2
Healthcare led to the upside coming off underperformance for several weeks.
Energy, Industrials, & Materials led to the downside.2
Energy was driven lower, we think, primarily because of President Trump’s “Twitter bomb” that expressed discontent with higher oil prices.
Industrials & Materials seemed weak from poor earnings in key companies and what has been a recent correction in the Chinese demand for goods & services.2
The US’s Gross Domestic Product reading for the 1st quarter came in at +3.2%.2
While this surpassed all analyst expectations, we are concerned that more than half the gain came from the volatile trade and inventories components that easily could soon reverse.
Consumer spending, the largest chunk of the economy, cooled for the 3rd straight quarter. 2
We believe it is critically important to note the degree to which collective global economic data has continued to trend in the opposite direction of the on-going rally in stock markets around the world.
While you can find historical data to support any market pundit’s conjecture, we think caution could come in very handy over the next 6-12 months for risk managing investment portfolios.
Ryan A. Mumy, CFP®, AIF® - Chief Investment Officer
Contact:828/855-9400 or info@CIASonline.com or rmumy@bloomberg.net
[1] Source: Bloomberg – 4/26/2019
[1] Source: Bloomberg – 4/26/2019