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Last week was good for financial assets, as global equity markets flourished in the absence of threats to stability.



Weekly Market Overview | August 27, 2018

August 27, 2018
By Peter Sorrentino, Chief Investment Officer

Last week was good for financial assets, as global equity markets flourished in the absence of threats to stability. Both the MSCI EAFE® Index and Emerging Market Index enjoyed strong rebounds, posting gains of 1.52% and 2.66%, respectively. Domestic equity prices were broadly higher, thanks to a 4% jump in crude oil prices. The energy sector led the way last week, adding 2.66%. Following close behind were the consumer durable companies that tacked on 2.12%, juxtaposed to the 1.75% loss experienced in the consumer staples sector. The size bias was not only evident in global stock price performance, but in the U.S. market as well as evidenced by the Russell 2000® Index, which added 1.93% to the S&P 500® Index gain of 0.88%. The roughly 1.5% decline in the trade-weighted value of the U.S. dollar last week was largely positive for energy and industrial metals prices but could not safeguard the prior week’s gain for grain prices, as corn and soy beans fell just over 4%, while wheat surrendered over 8%. The markets are still grappling with the implications of trade tariffs and the economics of product substitution.

As you can see illustrated in Exhibit 1, the leadership rotation in the market continues to play out over the waning days of summer with little fanfare and, so far, no real damage. Technology shares are still doing well, just not as well as health care. Consumer discretion is still barely clinging to a slight lead over consumer staples, and the trend to staples looks to be building. Just because segments of the market are expensive does not mean the market is doomed to decline.

Technology vs. Healthcare

Exhibit 1 (Source: Bloomberg)

Consumer Durables vs. Consumer Staples

Exhibit 2 (Source: Bloomberg)

 

For a PDF version of this publication, click here: 08.27.2018_WeeklyMarketOverview

 

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