Given the strong performance of US equities in 2019, we remind investors that there remains a strong case for staying invested. As the chart of the week shows, historically when the S&P returned greater than 30% over a one-year period, 85% of the time the subsequent year also saw positive returns. In fact, the average return was 10.4%, greater than the 8.5% that the S&P generated in any given one-year period.
The S&P 500 ticked higher by 0.98% this past week as global sentiment improved amidst easing US-Iranian tensions and an anticipated signing of phase 1 of the US-China trade deal by January 15 in Washington DC. We believe the likelihood of implementation is low, but there may be a boost to earnings growth should US-China trade relations improve. European stocks also closed higher, with the STOXX 600 up 0.22%, partially lifted by a widely expected UK parliamentary vote in favor of PM Johnson’s Brexit deal, which would pave the way for an EU exit by January 31. Read More
Brent and WTI oil prices plunged 5.28% and 6.36%, respectively, as US-Middle East conflict de-escalated following Iran’s latest missile retaliation. WTI prices were further dragged down as crude stockpiles increased by 1.2 million barrels, against analyst expectations of a decline. Read More
Global yields rose last week as risk-off sentiment faded following easing of geopolitical tensions in the Middle East. 2-year and 10-year US Treasury yields closed the week up 5 basis points (bps) and 3 bps respectively, despite slipping slightly on the back of a weaker than expected jobs report. Meanwhile, European sovereign debt saw similar sell-offs, with yields on UK 10-year Gilts and German 10-year Bunds climbing to 0.77% and -0.20%, respectively. Read More
The US dollar rose against a basket of its peers last week, climbing 0.61% as risk of conflict in US-Iran relations appeared to abate over the course of the week. The euro, which accounts for about half of the weight in the US dollar index, slipped to $1.1122, while the pound digested Brexit progress to end the week at $1.3061, amidst hints of a possible interest rate cut from the Bank of England. Read More
December’s flash Euro area headline HICP inflation rose 38 bps to 1.34% year-over-year (YoY), in line with expectations, driven by energy and unprocessed food. Core HICP inflation was broadly unchanged at 1.30% YoY, as expected. China's December CPI inflation was unchanged at 4.5% YoY, slightly below consensus, but still at eight-year highs. Pork inflation continues to be a big contributor, with prices surging 97% YoY in December – albeit at a slower pace than November’s +115% YoY given policy stabilization measures – as consumption rises ahead of the Lunar New Year. Read More
The December US jobs report was weaker than expected with nonfarm payrolls at 145k, undershooting expectations of 160k and below November’s revised pace of 256k. Detractors were in business services and manufacturing which shed -12k. Meanwhile, the headline unemployment rate stayed steady at 3.5%, matching expectations and maintaining its 50-year low. Euro area unemployment came in at 7.5%, down from 7.9% in November 2018. Read More
December’s US ISM non-manufacturing index came in better-than-expected, increasing to 55.0 from 53.9 in November and beating expectations of 54.5. Read More
For style performance, Large, Mid, and Small refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Government, Corporate, and High Yield refer to the US Treasury index, the US Corporate Credit index, and the US High Yield index, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality.
UK Industrial Prod. (Cons: 0.00%, Prior: 0.10%)
US CPI YoY (Cons: 2.40%, Prior: 2.10%)
Euro area Industrial Prod. (Cons: 0.30%, Prior: -0.50%)
UK CPI YoY (Cons: 1.50%, Prior: 1.50%)
Philly Fed Survey (Cons: 3.6, Prior: 0.3)
US Industrial Prod. (Cons: -0.10%, Prior: 1.10%)
UMich Cons. Sentiment (Cons: 99.0, Prior: 99.3)
“Euro PMI” refers to the Markit Eurozone Composite Purchasing Managers’ Index. “Cons. Conf.” refers to US Consumer Confidence. “GE IFO Business” refers to the German Ifo Business Climate Survey. “New Home Sales” refers to US New Home Sales (MoM). “Dur. Gd. Ord.” refers to US Durable Goods Orders. “UK GDP” refers to the QoQ estimate of the United Kingdom’s Gross Domestic Product for Q3. “Euro M3” refers to the YoY change in the Eurozone’s M3 Money Stock. “US GDP” refers to the estimate of US Gross Domestic Product for Q3. “Pers. Cons.” refers to US Personal Consumption. “UMich Cons. Sent.” refers to the University of Michigan Consumer Sentiment Index. “Japan Core-Core CPI” refers to Japan’s Consumer Price Index (ex- Food, Energy YoY).
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