Markets, Economy

Weekly Kickstart (11/25/2019-11/29/2019)

11/25/19 8:00 AM

iStock-626627280.jpgStocks pulled back last week, as the S&P 500 fell by 0.33 percent to 3,110.29. That still left the benchmark index up 24.07 percent 2019-to-date, and just 0.38 percent below the record close. Major indices managed to push to new all-time highs on Monday and then generally drifted lower for the rest of the week due in part to a handful of mixed trade war headlines. This price action was far from surprising following the best 6-week rally for equities since July with some traders likely eager for excuses to take profits prior to the Thanksgiving holiday. Looking ahead, the latest Bank of America Merrill Lynch fund manager survey showed that expectations for global economic growth next year have improved and stocks appear to be the preferred place to put money to work in 2020. However, cash levels have plunged to the lowest level since 2013, and some investors will point to 2019’s significant YTD gains as a reason to expect little upside for stocks going forward.

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These returns, though, only look so extreme because of how abysmal Q4 2018 was. In fact, compared to 2018’s high-water mark the S&P 500 is only up 6.13 percent, more in line with historical norms, and by some measures stocks are not even as “extended” as they were earlier this year. A new AAII poll also showed that investor optimism cooled last week after spiking to the highest level since May. Although still a very bullish reading, survey respondents’ slightly more cautious outlook for equities over the next six months is to be expected given the uncertainty that continues to surround the trade negotiations, economic growth, the upcoming primary elections, and numerous other issues. Altogether there are clearly a few potential volatility catalysts for the markets to overcome in the near-term, but the long-term prospects for stocks remain encouraging save some unforeseen macro shock. Moreover, elevated prices alone are not a great predictor of an impending correction, but this can be an opportune time for regular investors to consult with a professional financial advisor to make sure their positioning is properly aligned with their risk tolerance, retirement goals, and other unique variables. As always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that home-purchase applications increased, existing home sales climbed, housing starts rose, building authorizations jumped to a new cycle high, consumer confidence firmed, and gauges of both national and regional business activity improved. As for the negatives, homebuilder sentiment fell for the first time since June, and initial jobless claims held near a 5-month high. This holiday-shortened week the pace of economic data actually picks up with several important reports on foreign trade, housing, manufacturing, wage growth, inflation, and consumers scheduled to be released, along with the first revision to the government’s estimate of third quarter U.S. gross domestic product (GDP) growth and a speech from Federal Reserve chair Jerome Powell.

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What To Watch:

Monday

Tuesday

Wednesday

Thursday

  • Thanksgiving Day
  • Markets Closed

Friday

  • 2-Yr FRN Note Settlement
  • 10-Yr TIPS Settlement
  • NYSE Early Close
  • SIFMA Rec. Early Close 2:00 ET
 

 

Sources: Econoday, BofAML, Bloomberg, AAII, Twitter, FRBSL

Post author: Charles Couch

Disclosures