Weekly Market Digest: Markets Post Strong Returns in October and November

Optimism for a “phase one” trade deal with China drove stocks higher, punctuating a strong November. Early in the week, China increased penalties on intellectual property violations, though there was little detail. Enthusiasm for an agreement was tempered later in the week after President Trump signed a bill aimed at showing solidarity with pro-democracy protesters in Hong Kong. Third quarter US GDP growth was revised upward to 2.1%

Weekly Returns

S&P 500: 3,141 (+1.0%)
FTSE All-World ex-US (VEU): (+0.5%)
US 10 Year Treasury Yield: 1.78% (-0.01)
Gold: $1,464 (+0.1%)
EUR/USD: $1.102 (-0.0%)

Major Events

• Monday – Fed Chairman Powell said the central bank remains strongly committed to its roughly 2% inflation goal.
• Monday – China announced it would increase penalties for intellectual property theft.
• Tuesday – President Trump said trade negotiations with China were in the “final throes”, but also signaled events in Hong Kong would be important.
• Wednesday – US GDP growth for Q3 was revised higher to 2.1%.
• Friday – Activists in France protested Amazon on Black Friday.
• Friday – West Texas oil dropped below $57 amid signals OPEC will resist further supply cuts.

Our Take

As recently as September, we noted a bullish factor for stock prices was widespread pessimism around the economy and equities. Markets often reflect current positioning and move against popular opinion. Indeed, markets climbed this wall of worry and posted strong returns for October and November, pushing large cap US stocks to record highs. Now, it feels sentiment has swung to the other side, with many bearish market participants throwing in the towel and piling back into stocks.

Sentiment is just one factor, but our view is it is no longer one to be excited about. Likewise, on the trade front, popular opinion has shifted from skepticism to optimism. There are many indications a phase one trade deal will be reached, but we are rapidly approaching the December 15 deadline when additional tariffs are scheduled to be applied. To be a positive at this point, a trade deal would have to do more than just avoid new tariffs and would have to be perceived as true progress and not just delay.

From all of us at Personal Capital, we wish you an enjoyable Thanksgiving weekend. We are grateful for your support and interest.