Overview: Global equities saw declines last week as coronavirus concerns continued to weigh on the markets. In addition, investor sentiment was challenged by the third impeachment trial in our nation’s history and the U.K. formally leaving the European Union as of January 31. The S&P 500 broke a 71-day streak without daily moves greater than 1% in either direction, falling 1.6% on Monday and closing -2.10% lower over the week. Meanwhile, China markets were closed for the Chinese Lunar New Year holiday, and reopened February 3, trading down about 8%. Bond yields fell sharply last week in a flight-to-safety trade, with the U.S. 10-year Treasury yield falling 16 basis points (-0.16%) for the week to finish at 1.52%. Treasury yields have fallen about 40 basis points for the year (e.g. the 10-year started the year at 1.92%). These lower yields have helped fuel bond returns, with the Bloomberg Barclays Aggregate (taxable) and Municipal Indices up 1.9% and 1.8% respectively for the month of January. The yield on the taxable index has declined to 2.00% from 2.31% at the start of the year 2020.
This week: U.S. markets have rebounded to start the week, with the S&P 500 futures up about 0.5% before the open. A decent start to earnings-reporting season and solid economic reports have helped offset coronavirus fears. Short-term, we expect volatility to continue, as investors react to headlines. Longer-term, markets should return to trading on earnings and economic fundamentals. Preliminary U.S. gross domestic product (GDP) numbers reported last week showed that the U.S. economy grew at a 2.1% annualized rate in the fourth quarter, and 2.3% for the year 2019. Consumer spending and housing data have continued to fuel growth. Sales of existing homes were up a robust 3.6% in December, the best monthly gain since February 2019. Year-over-year sales were up 10.8%, the best rate in three years. U.S. inflation remains muted, as the favorite Fed measure core personal consumption expenditures (PCE) rose 1.6% year-over-year, below the 2% target. This week’s U.S. economic data is highlighted by the employment report on Friday, where the consensus is for 153,000 new jobs, with unemployment expected to remain at a 50-year low of 3.5%.
Weekly Returns and Data
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