Weekly Market Overview | August 12, 2019

August 12, 2019 by Peter Sorrentino

Domestic Equity Overview:
Domestic equity prices were down only slightly last week, with roughly half the market posting fractional gains, while the bulk of the selling pressure was found in the Energy and Financial Service sectors. The decline in Energy stocks was roughly in line with the drop in the price of crude oil, driven by 10% declines among selected refiners and oilfield service providers. Among the Financial Services stocks, it was selling pressure on brokers, regional banks and asset managers that propelled the decline. In a combination defensive move and yield search, shares of Utilities rose 1.2% to lead the advancing stocks. The Materials sector was in second place with a 0.7% gain. With only the commodity chemical names not posting gains last week, precious metals miners and industrial gas manufacturers enjoyed particularly strong buying pressure. The weakness in Financials and Energy were enough to pull the value style (as measured by the Russell 1000® Value Index) down 1%, while the Russell 1000® Growth Index clawed its way to a positive 0.1%.

International Equity Overview:
Currency exchange rates continued to play an outsized role in foreign equity market performance. The MSCI EAFE® Index fell 2.25% last week on a 1.3% decline in the developed European markets combined with a 1.9% loss among most Asian markets. The specter of a debt crisis, whether it starts in Italy or China, now has begun creeping onto the list of investor worries. Now, it is the strength of the U.S. dollar that has the spotlight. Illustrative of this is the return on the Shanghai CSI 300 Index, where a 3% decline in local market terms became a 4.7% loss when converted to U.S. dollars. The impact of a strengthening U.S. dollar is evident in the 2.25% decline registered by the MSCI Emerging Market Index, as these economies struggle with the impact of slowing global growth and deteriorating terms of trade. Even the benefit of the lower oil price is being blunted by the rising dollar.

U.S. Fixed Income Overview:
Yields on U.S. Treasury obligations and Municipal bonds continued to retreat, declining 6 to 12 basis points along the maturity scale. Bucking that trend were corporate bonds, where $36 billion in new issuance pushed rates up slightly for investment grade issues. The high-yield corporate bond market experienced a notable shift up in yields, as the investors continued to exit the lower quality high-yield sector for Treasuries. July witnessed the heavy redemptions for both exchanged-traded and open-ended, high-yield funds.

Commodity Overview:
Commodity prices, ex-energy, enjoyed positive price trends led by silver and gold with 4.7% and 3.6% gains, respectively. Agriculture prices were positive for a third week in a row, as U.S. corn and soybeans picked up another 2.7%. Energy prices were again weaker, as the price for West Texas Intermediate Crude lost 2%, and the price for regular unleaded gasoline lost another 6% on falling demand and rising inventory levels. The major beneficiary, besides the U.S. consumer, of falling hydrocarbon prices has been the Materials sector, which relies upon crude and natural gas as a feedstock for much of its product – hence the sector’s advance since the end of May.

 

The prospect of a currency war severely rattled global markets, but the history of such policies generally reflects very badly on those who instigate and perpetuate such episodes. Currency markets have always been vast in scope. Wasting national treasure on the buying or selling of one’s currency has time and again proven to be fruitless, generally profiting only the speculators who understand the scope of the folly. Remember that it was currency speculators that George Soros and Jim Rogers rose to global fame breaking the Bank of England. As illustrated in Exhibit 1, China has done little to upend the stability of its currency. China is now part of the WTO and trying to wean itself off the U.S. dollar for its terms of trade. There would be no quicker way to lose friends and make enemies than to undermine their faith in the currency as a reliable storehouse of wealth.

 

Renminbi vs. U.S. Dollar

Exhibit 1 (Source: Bloomberg)

For a PDF version of this publication, click here: 08.12.2019_WeeklyMarketOverview

 

NOTE: IMPORTANT INFORMATION
Source: Unless otherwise noted, all statistics herein obtained from Bloomberg.
This is not a complete analysis of every material fact regarding any company, industry or security. The information and materials herein has been obtained from sources we consider to be reliable, but Comerica Wealth Management does not warrant, or guarantee, its completeness or accuracy. Materials prepared by Comerica Wealth Management personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Comerica Wealth Management, including investment banking personnel. The views expressed are those of the author at the time of writing and are subject to change without notice. We do not assume any liability for losses that may result from the reliance by any person upon any such information or opinions. This material has been distributed for general educational/informational purposes only and should not be considered as investment advice or a recommendation for any particular security, strategy or investment product, or as personalized investment advice. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The investments and strategies discussed herein may not be suitable for all clients. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Comerica Wealth Management consists of various divisions and affiliates of Comerica Bank, including Comerica Bank & Trust, National Association; World Asset Management, Inc.; Comerica Securities, Inc.; and Comerica Insurance Services, Inc. and its affiliated insurance agencies. World Asset Management, Inc. and Comerica Securities, Inc. are federally registered investment advisors. Registrations do not imply a certain level of skill or training. Comerica Bank and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors regarding your specific situation. Non-deposit Investment products offered by Comerica and its affiliates are not insured by the FDIC, are not deposits or other obligations of or guaranteed by Comerica Bank or any of its affiliates, and are subject to investment risks, including possible loss of the principal invested. Past performance is not indicative of future results. Information presented is for general information only and is subject to change.

The S&P 500® Index, S&P MidCap Index, S&P 600 Index and Dow Jones Wilshire 5000 (collectively, “S&P® Indices”) are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and Standard & Poor’s Financial Services, LLC and has been licensed for use by Comerica Bank, on behalf of itself and its Affiliates. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The trademarks have been licensed to SPDJI and sublicensed for certain purposes by Comerica Bank, on behalf of itself and its Affiliates. Nothing herein is sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or Standard & Poor’s Financial Services LLC. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC make any representation or warranty, express or implied, to the owners of the content herein, or any member of the public regarding the advisability of investing in securities generally or in particular strategies or the ability of any particular strategy to track general market performance. SPDJI and Standard & Poor’s Financial Services, LLC only relationship to Comerica Bank, on behalf of itself and its Affiliates with respect to the S&P® Indices is the licensing of the Indices and certain trademarks, service marks, and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P Indices are determined, composed and calculated by S&P Dow Jones Indices or Standard & Poor’s Financial Services, LLC without regard to Comerica Bank and its Affiliates or any of the content herein. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation to take the needs of Comerica and its Affiliates or the owners of any of the content herein into consideration in determining, composing or calculating the S&P Indices. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC are responsible for and have not participated in the determination of the prices, and amount of any particular strategy or the timing of the issuance or sale of any particular strategy or in the determination or calculation of the equation by which any particular strategy is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation or liability in connection with the administration, marketing or trading of any particular strategy. There is no assurance that any particular investment product based on the S&P Indices will accurately track index performance or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR STANDARD & POOR’S FINANCIAL SERVICES, LLC GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE WAM STRATEGIES OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNCATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY COMERICA AND ITS AFFILIATES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDICES OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR STANDARD & POOR’S FINANCIAL SERVICES, LLC BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD-PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND COMERICA AND ITS AFFILIATES, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

“Russell 2000® Index” is a trademark of Russell Investments, licensed for use by Comerica Bank and World Asset Management, Inc. The source of all returns is Russell Investments. Further redistribution of information is strictly prohibited.

MSCI EAFE® is a trade mark of Morgan Stanley Capital International, Inc. (“MSCI”).

FTSE International Limited (“FTSE”) © FTSE 2016. FTSE® is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

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Weekly Market Overview | August 5, 2019

August 5, 2019 by Peter Sorrentino

Domestic Equity Overview:
The NASDAQ Index, which led the market last week, was the worst performing index for the opening days of August, surrendering 3.9%. Coming in at second place was the Russell 1000® Index, with a 3.2% decline. Despite the rate cut by the Federal Reserve Bank, the prospect of another 10% tariff on $300 billion of Chinese goods (surely to be followed by a retaliatory strike on U.S. exports) overshadowed the quarter point Fed Funds cut. The tariff news took the export-exposed Technology sector down 4.3% and the import-exposed Consumer Discretionary sector down 4.5%, as it has shown to be the U.S. consumer and not the Chinese who end up paying the tariff. The small-cap Russell 2000® Index fared somewhat better, losing 2.9%, as investors factored in the lower level of foreign exposure of smaller companies.

International Equity Overview:
Part of the motivation for the Federal Reserve to cut the benchmark yield was to support the efforts of other central banks attempting to stimulate economic growth in their economies and to stave off a liquidity and funding crisis in the emerging markets. The Fed’s actions did not achieve that end. The dollar continues to advance against most other currencies. This sent shares down 2.6% in the countries of the MSCI EAFE® Index; much of this decline is currency derived. Those in the MSCI Emerging Market Index suffered a larger degree of local market sell off, coupled with the adverse exchange rate movement posting a 4.3% price slide. Energy, Industrial and Technology sectors suffered the largest declines in these markets as well.

U.S. Fixed Income Overview:
Last week, the yield on U.S. Treasury obligations retreated by 10% from the six-year maturity out to 30 years. Short rates declined as well, with investors pouring stock proceeds into the safety of U.S. Treasury obligations. Municipal and corporate bonds benefited as well last week, but to a lesser extent, as investors leaned towards safety of capital over return on capital. Exhibit 1 depicts the movement of rates over the last week.

Recent Rate Movement

Exhibit 1 (Source: Bloomberg)


Commodity Overview:
The prospect of slowing global trade weighed on commodity prices, sending the bulk of the complex down for the week. Copper led the way among industrial metals, losing 4%, followed by a roughly 3.5% drop in U.S. grain prices. Crude oil fell 2.8%, but it was gasoline prices dropping 5.1% that surprised many traders. The seasonal change over to winter blend gasoline and heating oil is still some weeks off, but investors are reacting as if an inventory bubble is on the doorstep. Even with rising global tensions, gold managed to only add 0.9%, and silver’s recent run came to an abrupt halt with the metal falling 1.7%.

 

Virtually lost in the macro fog of war were second quarter earnings reports, which held more positive surprises than negative ones (not that they were enough to change the sentiment tide last week). The employment and PMI reports were also solidly positive and clearly showed an economy that, while slowing its pace of growth, is growing nonetheless. To be clear, last week did considerable damage, principally to investor psyches. But as we have covered before, a healthy market undergoes periodic adjustment; we will continue to climb the ‘Wall of Worry’. What we did not see last week was a spike in trading volume to new highs – it was not a race for the exits. Exhibit 2 shows the combined tape volume by trading day over the last twelve months. We did spike up, but nothing beyond what we have experienced before.

Trading Volume: 12-Month History

Exhibit 2 (Source: Bloomberg)

For a PDF version of this publication, click here: 08.05.2019_WeeklyMarketOverview

 

NOTE: IMPORTANT INFORMATION
Source: Unless otherwise noted, all statistics herein obtained from Bloomberg.
This is not a complete analysis of every material fact regarding any company, industry or security. The information and materials herein has been obtained from sources we consider to be reliable, but Comerica Wealth Management does not warrant, or guarantee, its completeness or accuracy. Materials prepared by Comerica Wealth Management personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Comerica Wealth Management, including investment banking personnel. The views expressed are those of the author at the time of writing and are subject to change without notice. We do not assume any liability for losses that may result from the reliance by any person upon any such information or opinions. This material has been distributed for general educational/informational purposes only and should not be considered as investment advice or a recommendation for any particular security, strategy or investment product, or as personalized investment advice. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The investments and strategies discussed herein may not be suitable for all clients. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Comerica Wealth Management consists of various divisions and affiliates of Comerica Bank, including Comerica Bank & Trust, National Association; World Asset Management, Inc.; Comerica Securities, Inc.; and Comerica Insurance Services, Inc. and its affiliated insurance agencies. World Asset Management, Inc. and Comerica Securities, Inc. are federally registered investment advisors. Registrations do not imply a certain level of skill or training. Comerica Bank and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors regarding your specific situation. Non-deposit Investment products offered by Comerica and its affiliates are not insured by the FDIC, are not deposits or other obligations of or guaranteed by Comerica Bank or any of its affiliates, and are subject to investment risks, including possible loss of the principal invested. Past performance is not indicative of future results. Information presented is for general information only and is subject to change.

The S&P 500® Index, S&P MidCap Index, S&P 600 Index and Dow Jones Wilshire 5000 (collectively, “S&P® Indices”) are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and Standard & Poor’s Financial Services, LLC and has been licensed for use by Comerica Bank, on behalf of itself and its Affiliates. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The trademarks have been licensed to SPDJI and sublicensed for certain purposes by Comerica Bank, on behalf of itself and its Affiliates. Nothing herein is sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or Standard & Poor’s Financial Services LLC. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC make any representation or warranty, express or implied, to the owners of the content herein, or any member of the public regarding the advisability of investing in securities generally or in particular strategies or the ability of any particular strategy to track general market performance. SPDJI and Standard & Poor’s Financial Services, LLC only relationship to Comerica Bank, on behalf of itself and its Affiliates with respect to the S&P® Indices is the licensing of the Indices and certain trademarks, service marks, and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P Indices are determined, composed and calculated by S&P Dow Jones Indices or Standard & Poor’s Financial Services, LLC without regard to Comerica Bank and its Affiliates or any of the content herein. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation to take the needs of Comerica and its Affiliates or the owners of any of the content herein into consideration in determining, composing or calculating the S&P Indices. Neither S&P Dow Jones Indices nor Standard & Poor’s Financial Services, LLC are responsible for and have not participated in the determination of the prices, and amount of any particular strategy or the timing of the issuance or sale of any particular strategy or in the determination or calculation of the equation by which any particular strategy is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and Standard & Poor’s Financial Services, LLC have no obligation or liability in connection with the administration, marketing or trading of any particular strategy. There is no assurance that any particular investment product based on the S&P Indices will accurately track index performance or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR STANDARD & POOR’S FINANCIAL SERVICES, LLC GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE WAM STRATEGIES OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNCATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND STANDARD & POOR’S FINANCIAL SERVICES, LLC MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY COMERICA AND ITS AFFILIATES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDICES OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR STANDARD & POOR’S FINANCIAL SERVICES, LLC BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD-PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND COMERICA AND ITS AFFILIATES, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

“Russell 2000® Index” is a trademark of Russell Investments, licensed for use by Comerica Bank and World Asset Management, Inc. The source of all returns is Russell Investments. Further redistribution of information is strictly prohibited.

MSCI EAFE® is a trade mark of Morgan Stanley Capital International, Inc. (“MSCI”).

FTSE International Limited (“FTSE”) © FTSE 2016. FTSE® is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.
 

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