Market Update: Wednesday, November 29, 2017

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Market Recap

  • Domestic markets climbed broadly higher, shrugging off an increase in geopolitical tensions after North Korean missile launch. S&P 500 Index +1.0%, Dow +1.0%, Nasdaq +0.5%.
  • Telecommunications, financials led markets; technology, utilities underperformed.
  • 10-year Treasury’s yield held flat at 2.33%.
  • NYSE breadth widely positive (2.2:1); volume ticked upward (~102% of 30-day avg.).
  • Commodities – WTI crude oil -0.4% to $57.86/bbl., COMEX gold -0.1% to $1293/oz. U.S. dollar mixed vs. most major crosses.
  • Economic data – U.S. consumer confidence index finished above expectations (129.5 vs. 124), marked the fifth straight month of increase and a new cycle high.

Overnight & This Morning

  • U.S. equities tick higher at the open as bullish sentiment continues, 2nd estimate of Q3 GDP (+3.3%) tops estimates.
  • Asia stocks largely shrugged of North Korea nuke test. Shanghai Composite +0.1%, Hang Seng -0.2%, Nikkei +0.5%, KOSPI -0.1%.
  • Europe green across the board. Sentiment boost from reported Brexit settlement (~£45-55B), regional economic data in line or beating consensus.
  • 10-year note yield +5 basis points (+0.05%) to 2.38%.
  • Commodities – Crude slipping (-0.5%) to $57.70/bbl. on surprise U.S. inventory build, gold -0.6% to $1287/oz. despite geopolitics, industrial metals down sharply..3%).

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Key Insights

  • Positive outlook for active strategies. As noted in our Outlook 2018 publication, the dynamics that benefited passive strategies in recent years have started to fade and the environment for active strategies may be improving. We believe the re-emergence of a more “classic” business cycle, where investors can determine winners and losers based on fundamentals, should support active management’s recent positive momentum in 2018. With divergences in monetary and fiscal policies emerging, interest rate differentials around the world create potential tailwinds for fundamental investing, including: 1) lower correlations and greater dispersion among investments; 2) potentially higher volatility; 3) rising interest rates and inflation, which lead to variability in corporate costs and profitability; 4) strong market breadth, enabling a broader range of investments to do well; and 5) improved performance for fundamental and value factors favored by active managers.

Macro Notes

  • Outlook 2018. It’s here! LPL Research proudly presents Outlook 2018: Return of the Business Cycle, complete with insightful commentary, and economic and market guidance for 2018. Download your copy now, or order print copies on Marketing On Demand (MOD). Visit the Resource Center | Your Business | Marketing | Marketing On Demand.

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Click Here for our detailed Weekly Economic Calendar

Wednesday

  • GDP (Q3)
  • PCE (Q3)
  • Beige Book
  • Yellen (Dove)
  • France: GDP (Q3)
  • Germany: CPI (Nov)
  • Eurozone: Consumer Confidence (Nov)
  • BOJ: Nakaso, Iwata, Harada
  • Japan: Industrial Production (Oct)
  • Japan: Vehicle Production (Oct)
  • China: Mfg. & Non-Mfg. PMI (Nov)

Thursday

  • Personal Income & Spending (Oct)
  • Core PCE (Oct)
  • Chicago PMI (Nov)
  • France: CPI (Nov)
  • Eurozone: Unemployment Rate (Oct)
  • Italy: CPI (Nov)
  • India: GDP (Q3)
  • South Korea: GDP (Q3)
  • Japan: CPI (Oct)
  • Japan: Nikkei Japan Mfg. PMI (Nov)
  • China: Caixin China Mfg. PMI (Nov)

Friday

  • Markit Mfg. PMI (Nov)
  • Construction Spending (Oct)
  • Germany: Import Price Index (Oct)
  • Italy: Markit/ ADACI Italy Mfg. PMI (Nov)
  • France: Markit France Mfg. PMI (Nov)
  • Germany: Markit Germany Mfg. PMI (Nov)
  • Italy: GDP (Q3)
  • Eurozone: Markit Eurozone Mfg. PMI (Nov)
  • UK: Markit UK Mfg. PMI (Nov)
  • Brazil: GDP (Q3)
  • Canada: GDP (Sep)
  • Japan: Vehicle Sales (Nov)

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.

Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

This research material has been prepared by LPL Financial LLC.

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