Market Update: Thurs, Apr 25, 2019 | LPL Financial Research

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Daily Insights

Soft landing for the global economy on track. Recent data has pointed to stability in global economic growth, even in the absence of a U.S.-China trade deal. In the U.S., we have seen improvement in manufacturing surveys, housing data, and leading indicators. In China, gross domestic product (GDP) surprised to the upside while exports, industrial production and investment all picked up in March. A rising tide should eventually lift the boats in Europe and Japan, which simply need to not get worse. Though there are mixed signals, including those from global bond markets, and structural risks that should be monitored, early signs of stability in developed overseas economies are noteworthy.

South Korean economy unexpectedly contracts. First-quarter GDP in South Korea unexpectedly contracted by 0.3%, compared with expectations for a 0.3% expansion, on weakness in investment and exports as global trade pressures weighed, particularly in China. Exports, which account for about half of South Korean GDP, fell 8% year over year in Q1.

More observations about the fresh highs. We discussed the new all-time high for the S&P 500 Index on our blog yesterday, but we think this market event deserves more attention. As such, in today’s blog we will offer 10 observations on the highs. New highs shouldn’t be feared, and the fundamental backdrop remains favorable for more gains. However, the possibility of a pickup in volatility after such a swift rally supports our recommended market weight equities allocation.

Durable goods rebound. Demand has started to recover as global conditions have perked up, according to preliminary March durable goods data. Durable goods orders jumped 2.7%, the biggest monthly rise since August 2018. New orders for nondefense capital goods, our best proxy for future capital expenditures, climbed 1.3% in March, the biggest monthly gain since July 2018. We think increased growth in capital spending could be a key driver of the next leg of this economic expansion, and we expect business spending to pick up more as global headwinds subside.

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Thursday

  • Durable Goods Orders (Preliminary, MoM, Mar); Cons: 0.5%, LP: -1.6%
  • Initial Jobless Claims (Apr. 20); LP: 196K
  • Kansas City Fed Manufacturing Activity Index (Apr); LP: 10
  • Japan Jobless Rate (Mar)
  • Japan Tokyo CPI Report (Apr)
  • Japan Industrial Production (Preliminary, Mar)

Friday

  • GDP Report (Initial, Q1 2019); Cons: 1.8%, LP: 2.2%
  • University of Michigan Sentiment Index (Apr); LP: 96.9
  • China Industrial Profits (Mar)

IMPORTANT DISCLOSURES

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Index data obtained via FactSet

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