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Ivan Gruhl, Chief Investment Officer, HK Financial Services

 

Overview: Stocks around the globe were higher last week, driven by U.S.-China trade optimism and the avoidance of another partial government shutdown. The S&P 500 was up 2.6%, and international developed stocks were 1.4% higher on the week, despite weak growth data from Germany and continued turmoil around Brexit. WTI crude oil closed higher at $55.59 per barrel, up 20% for the year-to-date. Oil has rallied on the prospects of rising Chinese imports and expectations of continued OPEC supply cuts. In bonds, 10-Year Treasury yields were about 4 basis points higher on the week, and yields are now about where they started the year 2019.

Economic Data: After disappointing data earlier in the year, China’s economic data for January has been generally positive, highlighted by a 9% rise in exports, well above expectations. Here in the U.S., data has been sporadic and delayed due to the impact of the recent 35-day partial shutdown. We did see data on U.S. CPI, which was unchanged for the third straight month, and on industrial production, which saw its first drop in eight months.

After 6 weeks: Several themes have emerged in 2019 that have reversed the fourth quarter selloff in the markets. In the last quarter of 2018, negative sentiment prevailed, as investors believed that geopolitical developments, trade and tariffs issues, and rate hikes would lead to a global recession. These concerns have been overcome this year by the fundamentals of strong corporate revenue and earnings growth, perceived progress in the U.S.-China trade talks, and a Federal Reserve that has recently announced its intention to keep interest rates near current levels. In spite of this, cash levels are high, with money market fund assets at their highest levels in nearly nine years. Re-deployment of this cash into stocks and bonds could provide a further technical boost to the markets, ceteris paribus.

This communication is for informational purposes only. It is not intended as investment advice or an offer or solicitation for the purchase or sale of any financial instrument.

Indices are unmanaged, represent past performance, do not incur fees or expenses, and cannot be invested into directly. Past performance is no guarantee of future results. 2428306