Weekly Wrap-Up

Last Week In Markets: Apr 9 - 13, 2018

Fisher Investments recaps the biggest market, political and economic news from last week, including US economic data releases, Europe trade and Chinese and Japanese loan growth data.

Global stocks ended 2.5% higher amid a light week of data reports.

In the US, March core consumer prices (excluding food and energy) rose 2.1% y/y, meeting expectations and accelerating from February’s 1.8% y/y. However, much of the increase is from the year-over-year comparison to a weak March 2017 core inflation rate. Importantly, with a relatively flatter yield curve dampening US banks’ willingness to lend, we believe US money supply growth and, correspondingly, inflation are unlikely to surge any time soon. On Monday, the Congressional Budget Office (CBO) released a report projecting $1 trillion annual federal budget deficits starting in 2020—stirring up debt-related fears. However, the CBO based these projections on many assumptions that oversimplify reality, such as extrapolating current fiscal trends using straight-line math. Additionally, history shows large budget deficits don’t impede economic growth or derail bull markets. For more, please see our 04/10/2018 commentary, “The Trouble With Long-Term Budget Projections.” Earnings season is underway—S&P 500 Q1 earnings growth expectations have increased from 11% at the beginning of the year to 17% today. Should results meet current expectations, it will mark the highest earnings growth since Q1 2011.

Eurozone and UK February industrial production rose 2.9% y/y and 2.2% y/y, respectively—both missing estimates. UK February manufacturing production increased 2.5% y/y, below forecasts. Eurozone February export and import values rose 3.0% y/y and 1.5% y/y, respectively while UK February export and import values grew 5.0% y/y and 2.0% y/y, respectively.

In China, export values fell 2.7% y/y and import values rose 14.4% y/y. March consumer prices increased 2.1% y/y, below consensus. March total loan growth increased 12.8% y/y in China and 2.0% y/y in Japan.

The Week Ahead:

The US posts March retail sales, industrial production and the Conference Board’s Leading Economic Index (LEI). The eurozone reports March consumer prices while the UK releases March retail sales, consumer prices and the February unemployment rate. China reports March retail sales, industrial production and its first estimate of Q1 2018 GDP. Japan announces March trade and inflation data.

Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses a Luxembourg tax basis. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.