Weekly Wrap-Up

Last Week In Markets: Mar 23 - Mar 27, 2020

Fisher Investments recaps the biggest market, political and economic news from last week, including US, UK, Eurozone and Japanese Purchasing Manger’s Indexes (PMIs), US GDP, and UK retail sales.

Global markets rose for the week as the US and other countries announced new stimulus measures. While recent market action may turn out to be the beginning of a sharp V-shaped recovery typical at the start of a bull market, there may also still be negative volatility to come—it’s impossible to know exactly when it may subside. As we have written, we continue to believe the best course is to remain patient and disciplined to your longer-term investment strategy. For more commentary on COVID-19 and recent market volatility, please review the March 2020 Market Update Webinar hosted by Senior Vice President of Research and Investment Policy Committee Member, Michael Hanson: Video | Audio.

In the US, the Fed announced additional measures in response to COVID-19, including unlimited quantitative easing (QE) and new or expanded credit lines to help businesses and other entities easily access funds. The Senate and House passed a $2 trillion bipartisan stimulus package—the Coronavirus Aid, Relief and Economic Security (CARES) Act—which includes direct payments to American households, suspended required minimum distributions for qualified retirement accounts, and loans and assistance to businesses. President Trump signed the bill into law late Friday afternoon. Ultimately, we believe the monetary and fiscal stimulus being put into place isn’t necessary to spur an economic turning point, but when that turning point eventually arrives, stimulus could provide a strong tailwind to the recovery. For more, please see our recent commentary, “Meanwhile, Back at the Fed…” and “What Is in That Big Stimulus the Senate Just Passed?” In economic news, the March Markit manufacturing and services flash Purchasing Managers’ Indexes (PMIs) decreased to 49.2 and 39.1, respectively (readings below 50 indicate contraction). Preliminary February durable goods orders were revised up to 1.2% m/m, higher than expected. The third estimate of Q4 2019 GDP growth was reported up 2.1% q/q annualized, unchanged from the previous estimate. Initial jobless claims jumped significantly to 3.28 million for the week ending March 21. From here, while we expect most labor market metrics to deteriorate, it is worth remembering that employment data are late-lagging indicators—they lack predictive power on the economy and stocks. For more, please see our 03/26/2020 article, “Putting Historic Jobless Claims Into Perspective.”

In the eurozone, March Markit manufacturing and services flash PMIs were reported at 44.8 and 28.4, respectively, with manufacturing faring better than analysts expected. In the UK, February core consumer prices (excluding food and energy) rose 1.7% y/y, higher than forecast. February retail sales were flat at 0% y/y, missing expectations. March Markit services and manufacturing flash PMIs read 35.7 and 48.0, respectively, with services missing expectations and manufacturing doing better than expected.

In Japan, data were light. The March Markit manufacturing flash PMI came in at 44.8, down from the prior reading. February imports and exports fell 13.9% y/y and 1.0% y/y, respectively.

The Week Ahead:

The first quarter of the year comes to an end. The US, eurozone, China and Japan report final March PMIs. The US and Japan release February unemployment figures while the UK announces Q4 2019 trade data. The eurozone posts February retail sales.

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.