Weekly Market Commentary November 19, 2018

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After two straight weeks of 2%-plus returns, the S&P 500 was down 1.6% last week. Global stocks also declined, pushing the MSCI ACWI down 1.2% last week.

Bonds had a positive week, as the Bloomberg BarCap Aggregate Bond Index was up 0.5%.


Key Points for the Week

  • Stocks fell sharply last week based on concerns that global economic growth is slowing.
  • Japanese and German economic growth slowed last quarter.
  • U.S. retail sales showed signs consumer spending growth is declining.

Global Uncertainty

Source: FactSet

The ongoing uncertainty about trade and economic growth is starting to weigh on markets. The direct effects of tariffs and rate hikes are important, but not as important as the indirect effect on investment and consumer spending.

In the U.S., a key supplier to Apple warned decreasing orders from the iPhone manufacturer would hurt its fiscal outlook. U.S. consumer spending increased more than expected last month, but a deeper analysis showed the gains were driven by higher gas prices and spending on items used in cleaning up from the hurricane season. After adjusting for one-time factors, spending looked weaker.

Both Japan and Germany experienced a decline in GDP last quarter, although much of the decline can be attributed to special circumstances. Natural disasters disrupting exports and weaker consumer spending pushed Japanese GDP lower. Germany released its third-quarter GDP, and it also showed a contracting economy. Germany’s GDP shrank by 0.2% in the third quarter. Much of the decline came from regulation changes delaying auto sales, but the weakness was broad.

The data indicate uncertainty is slowing down investment and restraining spending on key items. As consumers and corporate financiers become less certain about economic growth and the regulatory environment, they slow down their own activity. That means fewer iPhones get purchased and investment in new factories or equipment declines. Trade restrictions on one product affect far more than just a few companies in the targeted country.


Fun Story

Sneaky dog goes viral after it drinks owners’ beer

A dog was caught drinking its owner’s beer by a man who happened to witness it from a bus window. Jake Pulford captured the hilarity by taking pictures, which appear to show the dog checking to make sure the coast was clear before helping itself to the delicious beverage. The owner was unaware of the dog’s actions.


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