Last Week In Markets: Nov 28-Dec 2, 2016
The post-election global stock market rally paused, falling -0.7%, as a mid-week agreement from OPEC to modestly cut annual oil production highlighted an otherwise quiet week of economic data.
Media attention remains on US politics as President-elect Trump’s new cabinet nominations commanded plenty of ink. While the appointments create a few days of journalistic fodder, cabinet appointments are rarely consequential for longer-term market returns. At this stage, it’s pure conjecture to extrapolate what presidential appointees may or may not do.
US economic data were positive. The US economy grew faster than initially projected as Q3 GDP was revised upward to 3.2% from 2.9% (q/q) on better-than-expected personal consumption. Also, Q3 quarterly corporate profits expanded 5.2% y/y—the highest rate in four years. Unmistakably robust labor market data persist, symptomatic of underappreciated US economic strength. November employment payrolls increased 178,000 and the unemployment rate declined to a nine year low of 4.6%. Weekly jobless claims increased to 268,000—missing projections, yet remaining near a four-decade low.
October pending home sales growth rose modestly m/m—reaching sales figures near ten year highs. Unsurprisingly, mortgage applications fell during Thanksgiving week as rising interest rates likely slowed the pace of refinancing activity. Initial estimates of Black Friday and Cyber Monday sales were robust, surpassing last year’s totals. Despite eye-grabbing headlines, Thanksgiving weekend shopping isn’t a particularly meaningful harbinger of consumer or broader economic health.
Overseas data were sparse. October euro-area unemployment rate fell to a seven year low of 9.8%. November eurozone inflation ticked higher to 0.6% y/y, yet remains well below the European Central Bank’s target. October Japanese retail sales and household spending were unchanged, both beating expectations for modest declines. October industrial production grew 0.1% m/m, consistent with broader sluggishness in the Japanese economy. November Chinese manufacturing data suggested the world’s second largest economy is still comfortably expanding.
The Week Ahead:
Economic data will be sparse. Political attention likely shifts continents to Sunday’s Italian constitutional referendum. Short-term volatility tied to political events is always possible, whether “yes” or “no” prevails the outcome will finally be known and investors can move on. The European Central Bank meets to set monetary policy. The US reports trade and factory orders. The UK and Germany release industrial production.
—The Investment Policy Committee
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.