Weekly Wrap-Up

Last Week In Markets: Jan 21 - Jan 25, 2019

Fisher Investments recaps the biggest market, political and economic news from last week, including the US Leading Economic Index, Chinese GDP and an update on Brexit.

US economic data were light as the government shutdown extended into a fifth week. The Markit January manufacturing and services flash Purchasing Managers’ Indexes (PMIs) rose to 54.9 and 54.2, respectively—indicating economic expansion. The Conference Board’s December Leading Economic Index (LEI) declined 0.1% m/m, matching forecasts. While this seemingly confirms worries about slowing economic growth, a look under the hood suggests December’s report may be an outlier. Of the LEI’s 10 components, only 3 contracted, with stock prices detracting the most. However, considering December 2018 was the tail end of a steep, correction-like drop in stocks, that negative input was expected. While the LEI is one of the best available gauges to determine future growth, the longer-term trend matters more than small monthly ups and downs—and the US LEI is still relatively high and has risen more often than not over the last year.

In the eurozone, January Markit manufacturing and services flash PMIs came in at 50.7 and 50.2, both missing estimates but still indicating economic growth. As expected, the European Central Bank left monetary policy unchanged. In the UK, headlines continued focusing on Brexit developments. After Parliament voted down Prime Minister Theresa May’s initial proposal last week, she returned Monday with a three-pronged “Plan B” that Parliament is scheduled to vote on next week. Importantly, while media frequently portray businesses as sitting on their hands hoping catastrophe won’t strike, recent earnings calls suggest they have contingency plans to minimize disruption to normal operations—no matter how Brexit unfolds. For more on this, please see our 1/23/2019 article, “Amid Brexit Uncertainty, Businesses Plan Ahead.”

In Asia, December Chinese retail sales rose by 8.2% y/y and Q4 2018 GDP increased 6.4% y/y, both in line with forecasts. In Japan, preliminary December exports fell by 3.8% y/y while imports rose 1.9% y/y, both missing expectations. The January manufacturing flash Nikkei PMI decreased to 50.0, matching estimates. The Bank of Japan left monetary policy unchanged.

The Week Ahead:

The US announces December retail sales, January manufacturing and services PMIs and employment data. The eurozone releases December loan growth and unemployment, the January manufacturing PMI and the first estimate of Q4 2018 GDP. Japan reports December retail sales, unemployment and the January manufacturing PMI. China releases January Caixin manufacturing and non-manufacturing PMIs.

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.