Conway’s QuickTake: Week of November 25, 2019


Here’s what happened last week:

U.S. Equities
Last week, the S&P 500 finished modestly lower (-0.3%), ending a six-week streak of gains for the index. Within the S&P, healthcare (+0.8%) and financial stocks (+0.5%) had the strongest performance. The materials (-1.7%) and real estate (-1.2%) sectors were the biggest laggards. So far in 2019, Information Technology (+41.4%) remains a standout performer. The energy sector (+7.1%) continues to lag the S&P 500’s year-to-date gain of 26.3% with the healthcare sector (+15.3%) being the second poorest performer. The Russell 1000 Growth Index (+30.4%) remains ahead of the Russell 1000 Value Index (+22.5%) while the small-cap, Russell 2000 Index (+19.3%) is lagging comparable large-cap benchmarks.

As the U.S./China trade discussions continue, pro-democracy protests in Hong Kong are causing complications. The U.S. has historically supported the region, but China has indicated ‘strong countermeasures’ should the U.S. implement sanctions or other responses in support for the protests. This leaves President Trump in a difficult position. Outside of trade news, domestic economic data was light heading into the Thanksgiving holiday week.

iStock: 2019

International Equities
The developed, non-U.S. MSCI EAFE Index declined 0.6% over the week and the MSCI Emerging Markets Index was flat. The EM Index was supported by positive performance from Chinese equities, as the MSCI China Index increased 0.7%. Eurozone PMI data demonstrated a slower contraction in manufacturing than expected. Eurozone services activity weakened but remained above the level that indicated expansion, a positive surprise for European markets. In Japan, the Bank of Japan (BoJ) appears to be scaling back its ETF purchases of local stocks. The BoJ has gone 40 days without a meaningful ETF purchase, leading to speculation that the central bank is engaged in a stealth tapering period first implemented about a decade ago. The BoJ needs to be cautious as it scales-back ETF holdings; the central bank owns more than three-quarters of the local ETF market, leading to market uncertainty as it scales down its level of ownership.

Credit Markets
U.S. bond yields fell over the week despite a generally positive tone in markets. Falling yields paired with healthy demand was supportive for most credit market returns, and the Bloomberg Barclays U.S. Aggregate Index rose 0.3%. An exception was high yield, which experienced some weakness from issuer specific regulatory concerns within the telecom sector. Muni demand was robust and outweighed new supply amidst reports of healthy tax collection revenue in 2019.

Looking ahead…
Monday, November 25, 2019
•German Ifo Business Climate Index
•US Fed Reserve Chair Powel Speaks
Tuesday, November 26, 2019
•US CB Consumer Confidence (Nov)
•US New Home Sales (Oct)
Wednesday, November 27, 2019
•US Core Durable Goods Orders
•US GDP (Q3), Second Estimate
•US Pending Home Sales (Oct)
Thursday, November 28, 2019
•Thanksgiving
Friday, November 29, 2019
•German Unemployment Change
•Eurozone CPI (Nov)
•Chinese Manufacturing PMI (Nov)

Resource of the Week:
You probably heard the term direct indexing thrown around but might still be curious as to what it means. For a deeper understanding of direct indexing and how to implement it in portfolios, this Trillions conversation with the CEO of Parametric is worth a listen.

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