Your Weekly Update – China Spooks Markets; Stocks Keep Rising

Weekly Performance

US: S&P 500 Index +1.57%, Dow +2.01%, Nasdaq +1.74%
Europe: STOXX Europe 600 +0.29%, German DAX +0.32%, France CAC 40 +0.52%, U.K. FTSE 100 +0.19%
Asia: Japan Nikkei -.26%, China Shanghai Composite +1.10%, Korea KOSPI –0.04%
10-Year Treasury yield: +8 basis points to 2.55%, WTI crude oil +4.7%, COMEX gold +1.3%

It was another positive week for equities despite midweek jitters following reports that China’s central bank was mulling over the idea of reducing or even halting purchases of U.S. government debt. Following the news, Treasury yields spiked to more than 10-month highs on Wednesday and helped drive the S&P 500 Index to its first loss of the year on concerns that significant changes to China’s Treasury holdings, the world’s largest, could trigger a sell-off in both bond and equity markets. Major indexes quickly recovered, however, after officials in Beijing dismissed the reports, instead suggesting the bank is looking to diversify its $3.1 trillion in foreign reserves. The comments, coupled with a series of positive auctions of new Treasury issues throughout the week, allayed investors’ concerns as interest rates stabilized and the S&P 500 Index resumed its advance to finish out the week more than 1% higher.

Overseas markets struggled for direction, though regional indexes in Europe managed to eke out modest gains on the week. Political turmoil in Germany and the U.K. drew traders’ attention away from generally upbeat economic data out of the region. Meanwhile, Asian stocks turned in a mixed performance with Japan’s Nikkei slipping into negative territory for the week after the Bank of Japan made a surprise cut to its bond-buying program, while the rumors around China’s potential cut in Treasury purchases failed to stop the Shanghai Composite from posting an 11th straight gain; its longest win streak in more than 25 years.

Market participants will be watching the housing data come in this week after the U.S. Homebuilder Sentiment index hit its highest level in 18 years (74) in December. The Fed’s Beige book is slated for release on Wednesday; and other U.S. data due out include industrial production and capacity utilization. In Europe, investors will get a read on inflation data for the Eurozone, Germany and the U.K.  In Asia, Japan releases its Producer Price Index, along with industrial production data; and in China, gross domestic product and retail sales come out toward the end of the week.

 

Please see the methodology and assumptions used in GWP.

IMPORTANT: The projections or other information generated by GWP regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.

Investing involves risk, including possible loss of principal.

Indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

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.

The S&P 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.

The Dow Jones Industrial Average (DJIA) Index is comprised of U.S.-listed stocks of companies that produce other (nontransportation and nonutility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocks’ prices.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S.-based common stocks listed on the NASDAQ stock market. The index is market-value weighted. This means that each company’s security affects the index in proportion to its market value. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. It is not possible to invest directly in an index.

The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

The Deutscher Aktien Index (DAX) is a stock index that represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange.

The CAC 40 is a capitalization-weighted index of the 40 largest French equities designed to measure the overall performance of the Paris Bourse, the French stock exchange.

The FTSE 100 is an index of blue-chip stocks on the London Stock Exchange.

The Nikkei 225 Stock Average is a price-weighted index comprised of the top 225 blue-chip companies on the Tokyo Stock Exchange.

The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A shares and B shares listedon the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100. Index trade volume on Q is scaled down by a factor of 1000.

The Korea Composite Stock Price Index or KOSPI is the index of all common stocks traded on the Stock Market Division—previously, Korea Stock Exchange—of the Korea Exchange.

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments, and exports less imports that occur within a defined territory.

The Chicago Area Purchasing Manager’s Index is read on a monthly basis to gauge how manufacturing activity is performing. This index is a true snapshot of how manufacturing and corresponding businesses are performing for a given month. A reading of 50 or above is considered a positive reading. Anything below 50 is considered to indicate a decline in activity. Readings of the index have the ability to shift the day’s trading session one way or another based on the results.

Past performance is not indicative of future results. The Educational Tool provides access to “free” sample recommendations at no charge to you. However, if you decide to implement sample recommendations by executing trades with another firm, you may be charged fees, commissions, or expenses by that firm, as well as underlying investment fees and expenses. If you decide to open a Managed Service account, you will be charged a quarterly account fee, as well as additional fees and expenses. The tax loss harvesting and other tax strategies discussed should not be interpreted as tax advice and there is no representation that such strategies will result in any particular tax consequence. Clients should consult with their personal tax advisors regarding the tax consequences of investing.

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