Weekly Market Commentary November 13, 2017

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Global stock markets edged slightly lower after reaching new highs earlier in the week. The S&P 500 and the MSCI ACWI both slipped 0.2%. Bonds fared worse, as the Bloomberg BarCap Aggregate Bond Index shed 0.4%. Even with the slight decline, the S&P 500 and the MSCI ACWI are positive for November.  

Despite an anticlimactic news week, the S&P 500 dropped slightly mid-week due to an expected delay in the corporate tax cut proposed by the GOP. The European Union raised expectations for continental European growth, while lowering expectations for the United Kingdom. In the intermediate term, investors continue to sort out whether markets have overestimated Amazon’s effect on the retail industry and the benefits of alternatives to banks.

Key points for the week

  • Europe’s forecasts show continued growth, while the U.K. lags behind.
  • The retail sector continues to struggle.
  • Peer-to-peer lending adds an element of risk to the financial sector.

What are we reading?

Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links.

Euro-Area Growth Forecast Lifted Again as U.K. Outlook Dims

Europe continues to perform well as the spread between the U.K. and other European countries is forecasted to widen in the next year. The European Commission projects the U.K. will lag behind in economic growth by just more than 0.5% and inflation will double. The 19 European countries included in the forecast have seen 18 straight quarters of economic growth. Because trade is very important to the European Union, the analysis cited an appreciating euro as a risk to the estimate.

Bed Bath & Beyond is Buyout Bait & America’s ‘Retail Apocalypse’ Is Really Just Beginning

Big box retailers have opened 3,000 stores this year. But they have also closed 6,800 locations, and more chains are filing for bankruptcy than during the 2008 financial crisis. This is occurring in an economic environment that typically supports retail growth: high consumer confidence, low unemployment, and economic growth. Blaming the retail crisis entirely on competition from online retailers, such as Amazon, and shifting consumer habits is not entirely accurate. The primary problem is large retailers are loaded with debt and are struggling to secure financing.

Three Myths about Peer-to-Peer Loans

While the financial sector has reduced risk substantially since the 2008 financial crisis, the Federal Reserve Bank of Cleveland says risk is growing in the peer-to-peer (P2P) lending industry. Peer-to-peer lending enables individual investors to lend directly to borrowers seeking to consolidate credit card or other high-interest debt through online platforms. The Cleveland Fed studied the effect of P2P loans and found debt increased and credit scores declined among individuals who used them. The bank said P2P loans have little benefit and resemble predatory loans.


Fun story of the week

Starbucks soon will be opening Italian restaurants

People enjoy many different foods with their favorite cup of coffee, but pizza? That is a new one. Starbucks recently announced it is partnering with Princi, a bakery chain in Europe, and plans to open bakeries within its more spacious locations and eventually open standalone Princi locations across the country. Princi offers unique Italian pastries as well as other lunch and dinner options.


 

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