Weekly Wrap-Up

Last Week In Markets: Dec 30 - Jan 03, 2020

Fisher Investments recaps the biggest market, political and economic news from last week—including a brief overview of 2019, as well as elevated US-Iranian geopolitical tensions, UK money supply and eurozone lending.

2019 came to a close earlier this week, with global stocks logging their strongest year since 2009—up 27.7%.i While many attribute the year’s return to central bank activity or cooling tariff rhetoric, we believe it was largely a product of a normal recovery from the December 2018 correction. For more, see our 12/31/2019 commentary, “No, the Big 2019 Wasn’t All About Rate Cuts and a Tariff Truce.” A preview of the Investment Policy Committee’s 2019 recap and 2020 forecast will be sent to you in the Q4 2019 Executive Summary next week.

For the week, global equities were up slightly. Portfolios outperformed as our overweight to Information Technology and underweight to Materials contributed to relative returns.

In the US, economic data were light but positive. The December Markit manufacturing Purchasing Managers’ Index (PMI) was revised to 52.4—a minor change from the previous reading and continuing to signal expansion (readings above 50 indicate expansion). Unemployment claims, a lagging indicator, fell slightly in December to 222,000. In geopolitics, US-Iran tensions heightened as several retaliatory actions came to a head this week. On Friday, a US strike in Baghdad killed Iranian General Qasem Soleimani, the head of the Islamic Revolutionary Guard’s elite Quds Force. Soleimani oversaw Iran’s clandestine operations abroad—helping direct various Iran-aligned militias in Iraq, Syria, Lebanon, and Yemen. The strike followed an attempt by Iran-backed militia supporters to storm the US embassy in Baghdad—an attack the Pentagon claims Soleimani authorized. While dramatic headlines likely continue as Iran considers a response, we don’t believe these attacks or marginal escalation from here have power to wallop this bull market. Regional conflicts are a near constant in this world, but rarely affect global markets materially. The current bull market has already overcome countless regional conflicts and disruptions to oil markets, such as Russia’s annexation of Crimea and ongoing conflict in Ukraine. We will continue to monitor the situation and will update you if appropriate.

In the UK, the third reading of the December CIPS manufacturing PMI showed a slight increase to 47.5, improving since November’s release. Money supply (M4) increased 4.5% y/y in November, accelerating from October. In the eurozone, the Markit manufacturing PMI was also revised up to 46.3. While many manufacturing PMIs outside the United States signaled contraction throughout much of 2019, services—a far larger chunk of the economy—continued to grow. Lending increased 3.5% y/y in the eurozone in November, in line with expectations. Money supply (M3) increased 5.6% y/y, slightly less than analyst forecasts.

Data from Asia were light amid New Years’ celebrations. In China, the December Markit Caixin manufacturing PMI was released at 51.5, while the official manufacturing and services PMIs were announced at 50.2 and 53.0 respectively.

The Week Ahead:

The US, UK and eurozone release their respective revised December services PMIs. Japan updates December’s manufacturing PMI figures. The eurozone reports December inflation data and China will announce December money supply growth.

iSource: FactSet, as of 1/2/2020. MSCI World Index return with net dividends, 12/31/2018 – 12/31/2019.

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 the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.