Broker Check

Last Week'sSummary - November 26, 2018

November 26, 2018


U.S. equity benchmarks all fell sharply last week.
The Nasdaq & Dow Jones Industrial Average both fell over 4% on the week.[1]
The S&P 500 wiped out it’s year-to-date gain and now sits -1.54% in 2018.1
S&P 500 sub-sectors were all lower last week.
Utilities & Real Estate were the only sectors that lost less than 2%.1
Technology & Energy led to the downside with losses of 6.05% and 4.87%.1
The CBOE Volatility Index (VIX) gained 18% to end the week at 21.52.1

US Treasury yields were mixed last week.
The short end increased slightly while longer maturities saw yields decrease.1
Foreign bond yields were lower in Europe & little changed in Asia.1

Commodities as an aggregate asset class moved substantially lower last week.
WTI Crude oil declined 11%.1
Gold was flat.1
The US Dollar index gained 0.5%.1

In our opinion, U.S. economic data was mixed on the week.
Recent measures of the housing market have come in at low levels not seen since 2016.1
Initial jobless claims ticked higher in the most recent data.1
Both purchase managers indices reported slowing growth in November.1

An index of equities outside the U.S. (MSCI EAFE) was also down on the week.1


US equity indices fell hard in last week’s holiday shortened trading.
The S&P 500 erased its gain for the year and fell -3.8% on the week.[2]
We believe investors continue to battle concerns about the next steps of the Federal Reserve as economic data has been coming in weaker than expected.
In our opinion, all eyes are on the Fed for any hint of a possible pause in hiking interest rates. This comes as the Fed changes to a press conference after each meeting in ’19.
S&P 500 sub-sectors were all negative on the week.
Utilities & Real Estate led to the upside by losing the least.2
Energy & Technology led to the downside.2
Last week’s sell-off was felt around the globe in unison: Nasdaq -4.3%, Dow -4.4%, Euro Stoxx -1.4%, FTSE All World -2.7%, Shanghai Composite -3.7%.2
The Volatility Index (VIX) gained over 18% last week to finish the Thanksgiving week at 21.52.2
Interesting to note that the VIX increase has been relatively calm during the most recent sell-off as compared to what occurred in the 1st quarter of the year.
The yield curve flattened further last week as the 2yr US Treasury saw its yield move slightly higher while the 10yr & 30yr decreased.2
The spread between the 2yr & 10yr decreased to approximately 0.24%.2
While we don’t believe the yield curve needs to invert (2yr yield higher than 10yr yield) to be a classic signal of pain in the economy this time around, it is worth noting and following.
WTI Crude Oil fell 11% on the week to close at $50.42 per barrel.2
WTI is now down 23% in the last month and is -12.7% so far in 2018.2
We believe on-going supply concerns and decreasing demand have been the prime culprits behind WTI’s move to its lowest level since Oct 2017.
These supply concerns are related to Saudi Arabia and the US both pumping oil out at record levels.
In our opinion, another sign of negative sentiment can be seen in the oil options markets as traders have turned even more bearish than when prices plunged in 2014 from $115 to $47.
In what we believe could be a “silver lining” or small victory for the current equity markets, margin debt saw a significant decrease during the last month.2
The change was the largest month-to-month decrease since November 2008.2
While this by itself doesn’t “signal” anything, we believe it could contribute to softening the eventual bottom in stocks while also providing more ammo if and when the markets begin to trend higher.
Ryan A. Mumy, CFP®, AIF® - Chief Investment Officer
Contact:828/855-9400 or info@CIASonline.comor

[1] Source: Bloomberg – 11/23/2018

[2] Source: Bloomberg – 11/23/2018