Archive for ND&S Updates
NDS Weekly Commentary 12.23.19 – December Equity Rally Continues
December 23, 2019
Equities reached new milestones last week as all three major US indices touched new all-time highs. The rally persisted due to abating concerns on trade and geopolitics. Work continues on the details of the preliminary phase one trade deal struck between the US and China a week ago. US Treasury Secretary, Steve Mnuchin, said he expects the pact to be signed in early January. This, along with the imminent passage of the USMCA (revised trade deal with US-Mexico-Canada), has removed anxieties that weighed on the market throughout 2019.
For the week, the DJIA increased 1.1%, the S&P 500 rose 1.7%, and the tech-heavy NASDAQ climbed 2.2%. International stocks were also positive on the week with developed country stocks (MSCI EAFE) and emerging markets stocks (MSCI EM) adding 0.6% and 2.0%, respectively. As expected, fixed income assets struggled on the week with the 10yr U.S. Treasury closing 9bps higher at a yield of 1.92%.
As is well known by now, the US House of Representatives passed two articles of impeachment against the US President. This is the third time in history a sitting US President has been impeached by the US House of Representatives. Without additional information, the equity markets will remain unfazed as it seems unlikely the President will be removed in a Republican-led senate.
Economic data on the week was quite positive. The Markit Flash U.S. Composite PMI Output Index for December registered a reading of 52.2, up from 52.0 in November. The improved reading was helped by services sector growth and improving manufacturing conditions. Industrial production increased 1.1% in November, which beat expectations of a 0.8% increase. On Friday, the Bureau of Economic Analysis (BEA) reported that real U.S. Gross Domestic Product (GDP) increased to 2.1% (in-line with expectations) in the 3rd quarter. The BEA also reported that personal income rose 0.5% in November, which outpaced estimates of a 0.3% increase.
As a reminder, the U.S. markets will close at 1:00pm EST Tuesday and the full day Wednesday in observation of Christmas Day. Most importantly, we wish to extend to all a peaceful and enjoyable holiday season!
Weekly Commentary (12/16/19) – Markets up on Trade Deal
December 16, 2019
Markets advanced last week in anticipation of and on news that the U.S. and China have agreed on a Phase One trade deal. While the deal has not been officially signed, the Office of the United States Trade representative issued a press release saying that the deal “achieves meaningful, fully-enforceable structural changes and begins rebalancing the U.S. – China relationship.” Also supporting the markets was continued dovish news from the Fed as they decided at their December meeting to leave interest rates unchanged.
For the week, the DJIA advanced 0.43% while the S&P 500 gained 0.73%. The tech-heavy Nasdaq added on 0.91%. International markets moved higher on renewed hopes for a pickup in global growth. For the week, the MSCI EAFE index gained 1.72% while emerging market equities (MSCI EM) jumped 3.63% (January – March is a seasonably strong period for emerging market equities). Small company stocks, represented by the Russell 2000, finished ahead by 0.25% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week slightly higher as the yield curve continued to steepen. As a result, the 10 YR US Treasury closed at a yield of 1.82% (down ~2 bps from the previous week’s closing yield of ~1.84%). Gold prices closed at $1,475.60/oz – up 1.13% on the week. Oil prices jumped 1.47% last week as oil remains mostly range bound due to sufficient supply and tepid demand.
Economic news released last week confirmed a strong jobs market and still moderate inflation. On Wednesday, the U.S. Bureau of Labor Statistics (BLS) announced that the Consumer Price Index (CPI) advanced 0.3% in November and 2.1% year-over-year. Core CPI advanced 0.2% in November and 2.3% over the past 12 months (in-line with expectations). On Thursday, the BLS reported that the Producer Price Index (PPI) was unchanged in November, lower than expectations for a 0.2% advance. The PPI advanced 1.1% year-over-year which was lower than consensus for a rise of 2.0%. Neither the CPI nor the PPI point to unreasonable or out of control inflation, and this gives the Fed more time to remain accommodating. On Thursday, the Department of Labor reported that initial jobless claims for the week ending December 7 were 252,000, above expectations of 213,000. The labor market remains quite resilient, and jobless claims remain under the 300,000 threshold for the longest streak of weekly records for data reaching back to 1967. On Friday, the U.S. Commerce Department reported that retail and food-service sales moved ahead by 0.2% in November, below expectations for a 0.5% advance.
Economic and market fundamentals remain reasonable. We suggest investors stay close to their long-term target asset allocations with a slight defensive bias.
“The measure of who we are is what we do with what we have.” – Vince Lombardi
ND&S Weekly Commentary 12.09.19 – The Week Ends on a Positive Note
December 9, 2019
A strong U.S. jobs report released Friday mostly wiped out stock losses from earlier in the week. The U.S. Labor Department reported that employers added 266,000 jobs in November, well above estimates for 184,000. The report also showed unemployment dropped to 3.5%, a 50 year low. Separately, a report on consumer sentiment showed an increase from the prior month. This week look for economic reports on CPI, PPI and retail sales. Based on reports for black Friday and on-line sales, retail sales should continue to be a positive for the U.S. economy as the consumer remains healthy and supportive of the economy.
Stocks ended the week little changed with the S&P 500 up 0.21% and the DJIA and the NASDAQ down 0.06% and 0.08%, respectively. Historically December has been one of the best months of the year. The DJIA, S&P 500 and Russell 2000 indexes have ended higher in December more than another month. International equities ended the week on a positive note with developed markets up 0.38% and emerging markets up 0.88%. For the week, the best performing sectors were energy, consumer staples and healthcare. The worst sector was industrials. In fixed income, interest rates rose last week as the rate on the 10 year U.S. Treasury went from 1.78% to 1.84%.
The Federal Reserve will hold its final meeting of the year this week and is expected to leave interest rates unchanged. Investor attention will also have an eye on trade relations with China as Sunday’s December 15th deadline for increased tariffs on Chinese goods takes effect.
“It always seems impossible until it’s done.” – Nelson Mandela
Let’s Give Thanks
December 2, 2019
Investors and traders should be thankful for the financial markets that keep on giving. Once again the US stock market reached all-time highs during the Thanksgiving Day holiday week. Improving economic data and progress towards a US and China Phase 1 trade deal created a positive and optimistic tone throughout the week.
The DJIA rose 0.75%, the S&P 500 added 1.04% and the Nasdaq finished up 1.72%. Developed international markets, as measured by the MSCI EAFE, also fared well increasing 0.52%. Emerging market equities were the only laggard down 0.80%. Despite recession worries and political turmoil in Washington, consumers, representing 70% of our GDP, are still spending. 3Q19 GDP was increased to 2.1% outpacing expectations for a 1.9% increase. The solid job market with historically low unemployment, a 3% increase in wages, and lower debt burdens have given consumers a lot to be thankful for and optimistic about their future. As a result, Black Friday hit a record $7.4 billion in US online sales with $2.9 billion in purchases made directly from smartphones.
For the week, consumer discretionary was the best sector climbing 1.78% with info tech coming in next up 1.73%. The energy sector continues to lag down 1.55% due to oversupply worries and US and China trade tensions. Fixed income assets moved sluggishly with the 10 year US Treasury remaining at around a 1.78% yield. The safe haven investment, gold, also was down 0.3% and declined 4% in November, its worst month in three years.
There will be economic reports on employment, consumer confidence, and Markit/ISM manufacturing and service PMIs. We would not be surprised if the markets paused for a while given the market’s healthy advance recently.
“Feeling gratitude and not expressing it is like wrapping a present and not giving it.” – William Arthur Ward
ND&S Weekly Commentary 12.30.19 – Happy New Year!
December 30, 2019
Santa brought investors a positive holiday-shortened week. The Nasdaq reached all-time highs on Thursday and the Dow Jones Industrial Average (DJIA) and S&P 500 finished at their highest levels as well. For the week, the tech-heavy Nasdaq gained 0.91%, while the S&P 500 and DJIA returned 0.60% and 0.67%, respectively. So far this year, technology stocks in the S&P 500 have risen 48%. Investor enthusiasm spread internationally with developed equity markets (MSCI EAFE) gaining 0.77% and developing markets (MSCI EM) surging 1.16%. Interest rates declined as the yield on the 10yr U.S. Treasury came down from 1.92% the previous week to end at 1.87%.
Investors felt better about improving trade relations between the U.S. and China, positive economic data and booming retail sales from November 1st through Christmas Eve. According to the MasterCard Spending Pulse™, online spending grew 18.8% compared to 2018 with 14.6% of all retail sales taking place online.
Oil prices continue to see support from OPEC efforts to curb supply as well as hopes that the U.S./China trade deal will bolster global oil demand. West Texas Intermediate (WTI) and International Brent Crude markets were both up over 2% on the week. Gold prices also rallied 2.25%, which is a sign investors are hedging a little against equities.
On New Year’s Eve, consumer confidence will be reported and the Federal Reserve’s December meeting minutes will be released Friday along with an ISM Manufacturing report.
Without question it has been an eventful and prosperous year. We continue to recommend staying diversified and favoring dividend income and growth. Dividends have accounted for approximately 33% of the S&P 500 total return since 1960.
Wishing the very best for the New Year!