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.
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.
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.
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
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.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of CWM, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.