Conway’s QuickTake: Week of November 18, 2019


Here’s what happened last week:

U.S. Equities
Most domestic indices held or set highs as the S&P 500 Index gained 0.9% over the week. Within the S&P, the healthcare sector (+2.5%) got a bounce following favorable regulatory news from Washington. The real estate (+2.1%) and utilities (+1.8%) sectors also performed well as interest rates declined from recent highs, making investment in these sectors more attractive. The energy sector (-1.0%) again lagged partially due to a decline in Exxon Mobil, a large constituent. Outside of the S&P, large-caps outperformed small-caps and growth outpaced value for the week, continuing the trend we’ve seen this year.

Optimism surrounding a potential U.S. trade deal with China continues to be a key driver of markets and global economic sentiment. Latest reports indicate that negotiations for phase I of a deal continue to progress, despite some conflicting signals last week. Outside of trade, the Fed may hold rates at current levels following data indicating recent weakness is contained to the manufacturing sector. While industrial output remains tepid, recent retail sales data came in at better than expected levels.

Source: iStock 2019

International Equities
Non-U.S. equity markets lagged their domestic counterparts last week. The developed, international MSCI EAFE Index was nearly flat, rising a modest 10 basis points. Emerging markets suffered more, as the MSCI Emerging Markets Index fell 1.5% following a larger decline in Chinese equities driven by disappointing economic data.

In Europe, recent German data indicated that the economy is still growing, although very slowly; the data showed economic growth of just 0.1% over Q3. Like the U.S., much of the weakness in the German economy has been contained to the manufacturing sector, which has suffered from various uncertainties like trade and Brexit. The U.K. similarly avoided recession in Q3. The British economy grew 1% over the quarter, although many experts expect lower growth moving forward. In Asia, Japan’s economy expanded at a modest pace of 0.2% as strong domestic demand offset a fall in exports. In emerging markets, China’s economy had some worrisome signs as the government reported a host of disappointing economic data. Experts expect that Beijing will further increase stimulus measures to offset economic strain from tariffs and slower global growth.

Credit Markets
Bond yields fell slightly following a recent rally from prior lows. The decline was partially a consequence of lower inflation data. The fall in yields was generally supportive for credit asset classes, which generated small positive returns last week. The investment-grade market had a large level of issuance that was received well.

Looking ahead…

Tuesday, November 19th, 2019
•US Building Permits (Oct)
•Chinese interest rate decision
Wednesday, November 20th, 2019
•US Crude Oil Inventories and Fed Meeting Minutes
Thursday, November 21st, 2019
•Bank of England Treasury Committee Hearings
•ECB publishes account of policy meeting
•US Philadelphia Fed Manufacturing Index (Nov)
•US Existing home sales
Friday, November 22nd, 2019
•Britain Manufacturing PMI and Services PMI
•Canada Core Retail Sales

Resource of the Week:
Even if you don’t use Spotify personally, you’ve likely heard of the way it’s changed the music industry over the past decade and made streaming the mainstream. Afterall, when’s the last time you purchased a CD? This episode of Invest Like the Best sits down with Spotify’s founder and CEO, Daniel Ek. The conversation spans Spotify’s past and future in addition to the audio industry’s evolution. Worth a listen if any of these items appeal to you.

Sources: Investing.com, Bloomberg, The WSJ, T. Rowe Price Global Markets Weekly Update