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Weekly Market Digest: The Government Reopens & January Remains Strong

Last minute on Friday of this week President Trump announced that a tentative deal had been reached to reopen the Federal government for a period of three weeks. This brings temporary respite to the roughly 800,000 Federal workers in the form of back pay, and possibly a return to some form of normal Federal Services for Americans.

Weekly Returns

S&P 500: 2,665 (2.8%)
FTSE All-World ex-US(VEU): (0.4%)
US 10 Year Treasury Yield: 2.76% (-1.11%)
Gold: $1,309 (2.2%)
EUR/USD: 1.141 (0.4%)

Major Events

  • Monday – US Markets closed in observance of Martin Luther King Jr. Day – he would have been 90 years old this year.
  • Tuesday – US markets start the week negatively on reports from the International Monetary Funds’ slower global growth forecasts, slowing home sale growth in the US, as well as information on slowing growth of the Chinese Economy.
  • Wednesday – US Markets rebound from Tuesday’s losses.
  • Thursday – The Senate fails to pass two opposing spending bills, resulting in further delays in opening the US Federal Government.
  • Friday –President Trump announces that a deal has been reached to reopen the Federal government for a period of three weeks.

Our Take

On Tuesday, the US markets reacted negatively to a series of reports of pointing to reduced growth in a variety of global markets: China, Europe, and US Real Estate. It important to keep in mind that the markets reacted negatively to reduced growth. Not zero growth, not negative growth, just less growth. Of course, less growth could be the precursor to no, or negative growth, but that is not a certainty, just one of several possibilities.

Wednesday, markets rebounded on a variety of positive US Company Earnings reports, effectively reversing the previous day’s losses.
Friday, markets closed largely in the green for the day, and year to date US Markets, International Markets, US Government Debt, and Gold are all positive (depending on the indexes you use, I’m referencing the S&P 500, VEU, the US 10 Year respectively). So far its been quite the reversal from 2018.

If you’re just digging out from the start of the year, take a look at our 5 minute 2018 market recap from members of our Investment Committee here, or if you’re like me and you like the details, take a look at our full report.

On the shutdown front, we view the reopening of the Federal Government, even for a short three-week period as a positive. As we’d stated previously, history has shown past shutdowns have had very little impact on stock markets, but the longer this shutdown lingered (or lingers, should the 3-week period prove too short for our lawmakers to come to a more permanent agreement), the more the risks increase. Today’s agreement seemed particularly timely as impacts of the prolonged shutdown began to more widely impact the American public – the FAA Friday delayed flights at several of the nation’s airports, including LaGuardia Airport in New York, citing reduced air-traffic control staffing.

We’ve now seen several months of increased(relative) volatility, and continued concerns around China, the Fed, and the United States’ political gridlock. While we’ve certainly left the comfortable periods of recent memory (2017’s fairly slow and steady market increases come to mind in particular) we’ve also seen some reassuring signals from 2018 and early 2019’s markets.

In 2018, we saw that diversification does in fact provide value for investors, and investors were reminded that the concept of risk is real and should be continuously accounted for.

So far in 2019, we’ve seen how quickly markets can ebb and flow from good to bad on a daily basis – lending credence to the concept of avoiding timing the markets. Additionally, this has been one of the strongest January’s for the US markets in recent memory.

We hope everyone has a safe and enjoyable weekend.

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