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The coming of summer brought with it more optimism for global markets.



Weekly Market Overview | June 24, 2019

June 24, 2019
By Peter Sorrentino, Chief Investment Officer

The coming of summer brought with it more optimism for global markets. The prospects of a meeting at the upcoming G20 summit between Presidents Trump and Xi lifted the markets. Dovish comments from the Federal Reserve sent interest rates lower across the term spectrum, with the U.S. Treasury 10-year below 2% inter-day on Wednesday. The prospect of the central banks opening the liquidity sluice gates helped push the value of both gold and bitcoin back to their one-half retracement levels – a point that market technicians view as critical for mounting a sustainable advance of these purchasing power safe harbors. Tanker attacks in the Strait of Hormuz helped send crude oil prices up 9.4%, while a refinery fire just south of New York City contributed to a 7.1% increase in gasoline prices last week. These served as the catalysts for the 4.9% gain enjoyed by the stocks in the Energy sector, making it last week’s leader. Following at +2.9% was the Technology sector, led higher by the large consumer technology providers. Health Care stocks rounded out the top three with a gain of 2.7%, led principally by the major pharmaceutical manufacturers. Last week’s declines were fractional with Consumer Staples, Materials and Financial Services, down 0.63%, 0.35% and 0.07%, respectively. Last week’s decline in the overall level of interest rates served to push precious metals prices higher and Financial Service stocks lower. It also served to reignite the large-cap growth bias in the overall market as witnessed by the 2.2% advance of the Russell 1000® Index over the 1.8% gain for the Russell 2000® Index. Within the Russell 1000® Index, growth stocks posted a 2.4% gain to the 1.4% gain for the value stocks. The prospect of lower rates sent global markets higher as well with the MSCI EAFE® Index up 2.2% and the MSCI Emerging Market Index up 3.8%.

The data table below is something I pull together manually each weekend. It would be easy enough to automate this process, but assembling the data by hand brings the details of what is happening into sharper focus. This year, I have noticed a significant pickup in the underlying volatility of all the markets. This week, we witnessed oil prices moving by almost 10%, and that was not the largest weekly move for oil this year. At the equity sector level, there have routinely been five percentage point performance swings each week for the year-to-date returns, and when you move out to the running twelve-month return, the changes are even larger. Perhaps the biggest surprise this year has been the volatility of interest rates as witnessed by the U.S. Treasury 10-year note’s brief dip under 2% on Wednesday. Recalling that in the first week of November last year, this same security was poised to break above the 3.25% level – a technical milestone that would, had it been breached, have had significant negative implications for equity prices. Now, just over six months later, rates have fallen by a staggering 38%. This rapidly-changing dynamic of market forces was a part of our decision to embrace a broader market benchmark, the Russell 3000® Index, for our investment management accounts. By broadening our market participation, we limit the possibility of missing out on a significant move within the financial market. Our stewardship mandate requires us to take as broad a view as possible and, to that end, we believe the recent change is both appropriate and timely.

 

For a PDF version of this publication, click here: 06.24.19_WeeklyMarketOverview

 

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