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Weekly Update

Market Summary

Spillover from geopolitical concerns in the European Union and the continued exodus from popular growth and momentum stocks weighed heavily on the broad equity markets last week and into early trading this week. For the week, the S&P 500 slid -1.5% while the NASDAQ and Dow Jones lost -2.1% and -2.2%, respectively. Some of the notable technology and consumer discretionary stocks have fallen into bear market territory with 20%+ stock price declines from their June highs due to concerns of peaking earnings growth. The 10-year Treasury yield dropped from 3.19% to 3.07% over the course of the week, which indicates an increase in demand for the safe haven asset.

Investor concerns surrounding the United Kingdom’s planned withdrawal from the European Union heightened considerably this past week after U.K. Brexit Secretary Dominic Raab resigned from his post, stating that he couldn’t support Prime Minister Theresa May’s Brexit deal structure. Brexit uncertainty in addition to the ongoing budget dispute between the E.U. and Italy have weighed on global equity markets.

There were some positive geopolitical headlines this past week, as trade tensions between the U.S. and China eased, although it was not enough to calm equity markets. President Trump stated that he thinks a “deal will be made” between the U.S. and China at their discussion following the G20 summit in Argentina later this month. Many analysts have noted that a temporary “cease-fire” is more likely as the U.S. continues to push demands for structural changes in China, such as intellectual property protections for U.S. multinational companies.

Many investors are hoping that a resumption in corporate stock buybacks following the third quarter earnings blackout period will provide some support for equity markets and reduce the recent volatility. Reuters has noted that the S&P 500 constituents have set another record for share repurchases in the third quarter and look on track to break above $200 billion for the quarter, beating the previous record set in the second quarter of $191 billion. Stock buybacks have a positive impact on stock returns by increasing the relative ownership stake of remaining shareholders.

Economic Highlights: 

Inflation: October’s core U.S. CPI reading of 2.1% year-over-year came in below consensus expectations and the prior month reading of 2.2%. The year-over-year core inflation rate has now fallen in three consecutive months at a time when many market participants have been expecting it to accelerate.

Retail Sales: October showed a strong increase in retail sales of 0.8% over the prior month, but came with notable downward revisions in August and September sales growth readings. The downward revisions may shave between 0.2% and 0.3% off of third quarter GDP growth, according to FTN Financial Group.

US Economy – The Week Ahead

Tuesday 11/20/2018

  • Housing Starts – Consensus Estimate: 1,234K (2.7% MoM), Prior Month: 1,201K (-5.3% MoM)
  • Building Permits – Consensus Estimate: 1,280K (0.8% MoM), Prior Month: 1,270K (1.7% MoM)

Wednesday 11/21/2018

  • Initial Jobless Claims – Consensus Estimate: 215,000 (-0.4% WoW), Prior Week: 216,000 (2.9% WoW)
  • U.S. Durable Goods Orders Month-over-Month Growth – Consensus Estimate: -2.4%, Prior Month: 0.7%
  • Leading Economic Indicator Index (Month-over-Month) – Consensus Estimate: +0.1%, Prior Month: +0.5%
  • University of Michigan Consumer Sentiment Survey (Final) – Consensus Estimate: 98.3 (-0.3% MoM), Prior Month: 98.6 (-1.5% MoM)

Thursday 11/22/2018

  • Markets closed for Thanksgiving – No Data%

Friday 11/23/2018

  • No Data
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