After two straight weeks of 2%-plus returns, the S&P 500 was down 1.6% last week. Global stocks also declined, pushing the MSCI ACWI down 1.2% last week.
Bonds had a positive week, as the Bloomberg BarCap Aggregate Bond Index was up 0.5%.
Key Points for the Week
- Stocks fell sharply last week based on concerns that global economic growth is slowing.
- Japanese and German economic growth slowed last quarter.
- U.S. retail sales showed signs consumer spending growth is declining.
The ongoing uncertainty about trade and economic growth is starting to weigh on markets. The direct effects of tariffs and rate hikes are important, but not as important as the indirect effect on investment and consumer spending.
In the U.S., a key supplier to Apple warned decreasing orders from the iPhone manufacturer would hurt its fiscal outlook. U.S. consumer spending increased more than expected last month, but a deeper analysis showed the gains were driven by higher gas prices and spending on items used in cleaning up from the hurricane season. After adjusting for one-time factors, spending looked weaker.
Both Japan and Germany experienced a decline in GDP last quarter, although much of the decline can be attributed to special circumstances. Natural disasters disrupting exports and weaker consumer spending pushed Japanese GDP lower. Germany released its third-quarter GDP, and it also showed a contracting economy. Germany’s GDP shrank by 0.2% in the third quarter. Much of the decline came from regulation changes delaying auto sales, but the weakness was broad.
The data indicate uncertainty is slowing down investment and restraining spending on key items. As consumers and corporate financiers become less certain about economic growth and the regulatory environment, they slow down their own activity. That means fewer iPhones get purchased and investment in new factories or equipment declines. Trade restrictions on one product affect far more than just a few companies in the targeted country.
A dog was caught drinking its owner’s beer by a man who happened to witness it from a bus window. Jake Pulford captured the hilarity by taking pictures, which appear to show the dog checking to make sure the coast was clear before helping itself to the delicious beverage. The owner was unaware of the dog’s actions.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.
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