Week in Review


Week in Review: January 8, 2018

The New Year kicked off on a bullish note for stocks. The S&P 500 gained 2.6%, its best weekly start to the year since 2006. Developed international stocks (as measured by the MSCI EAFE) rose 2.5%, while the MSCI Emerging Markets Index jumped 3.7%. The factors that drove the bull market last year remain in place: strong corporate earnings supported by robust and synchronized global economic growth, while inflation remains subdued.


Markets Ring in the New Year


Throughout the week we received more data suggesting the economy remains on track and may even be improving. Friday’s jobs report showed that hiring slowed somewhat in December but remained robust for the year as a whole with job gains of 2.1 million. This is only the second time on record that more than 2 million new jobs have been minted in one year. Hiring has now risen for 87 straight months, the longest uninterrupted period of job expansion on record and the unemployment rate held steady at a 17 year low of 4.1%. 

U.S. composite Purchasing Managers Index (PMI) for December dipped slightly, but continues to indicate solid expansion. Manufacturing for December rose to 55.1 – up from 53.9 in November – pointing to the fastest expansion in factory activity since March 2015. The services component checked in at 53.7 down slightly from November’s reading of 54.5 but comfortably in expansion territory. 

It’s a similarly bright economic picture for most of the rest of the world. The Eurozone composite PMI increased to 58.1 in December from 57.5 in November. The December reading points to the fastest expansion for Europe’s private sector since February 2011. Manufacturing PMI’s for Asia rolled in last week showing month-on-month expansion across the region except for South Korea. We remain particularly focused on China which saw its composite PMI for December jump to 53.0 – the highest reading in a year - from 51.6 in November, suggesting the soft landing for the world’s second largest economy remains on track. 

The yield on the 10 year US Treasury rose 7 basis points to 2.47%, as fixed income investors gained confidence in the global economy. Nevertheless, global monetary policy and financial conditions remain easy and inflation continues to be low. Minutes from the Federal Reserve’s December meeting reiterated the Committee’s confidence that inflation would gradually increase to their objective of 2% in the “medium term” aided by the potential economic stimulus of the tax bill. We continue to watch closely for any signs that inflation or inflation expectations are rising outside these benign assumptions, but for now Goldilocks continues to rule the roost for risk assets.


Market Returns (USD)

1-Week

Quarter-to-Date

Year-to-Date

1-Year

Global Equities

MSCI All Country World

2.7%

2.7%

2.7%

25.0%

S&P 500

2.6%

2.6%

2.6%

23.3%

Dow Jones Industrial Average

2.4%

2.4%

2.4%

30.2%

NASDAQ

3.4%

3.4%

3.4%

31.5%

Russell 2000

1.6%

1.6%

1.6%

15.2%

MSCI EAFE

2.4%

2.4%

2.4%

25.3%

MSCI Emerging Markets

3.7%

3.7%

3.7%

39.2%

Hard Assets

MSCI US REIT

-2.2%

-2.2%

-2.2%

-0.8%

Alerlan MLP

4.5%

4.5%

4.5%

-4.2%

Bloomberg Commodity Index

-0.3%

-0.3%

-0.3%

1.4%

Fixed Income

ICE BofAML Municipals 1-10 Year A-AAA 

0.1%

0.1%

0.1%

2.4%

Bloomberg Barclays Intermediate Government/Credit

-0.2%

-0.2%

-0.2%

1.6%

Bloomberg Barclays High Yield Bond

0.7%

0.7%

0.7%

7.4%

JPMorgan GBI Emerging Markets Global Diversified

1.8%

1.8%

1.8%

16.8%

Market Levels

Friday

Week Ago

Year End

Year Ago

S&P 500

2,743.15

2,673.61

2,673.61

2,269.00

Dow Jones Industrial Average

25,2953.87

24,719.22

24,719.22

19,899.29

10-Year U.S. Treasury Yield (Constant Maturity)

2.47%

2.40%

2.40%

2.37%

Gold ($/oz)

$1,319.59

$1,302.80

$1,302.80

$1,180.12

Crude Oil ($/barrel)

$61.44

$60.42

$60.42

$57.36

U.S. Dollar / Euro ($/)

1.20

1.20

1.20

1.06

U.S Dollar / British Pound ($/£)

1.36

1.35

1.35

1.24

Japanese Yen / U.S. Dollar (¥/$)

113.05

112.69

112.69

115.35