Market Update: Fri, Dec 13, 2019 | LPL Financial Research

Daily Insights

A surge of headlines. Stocks around the world are higher this morning after a flurry of trade and geopolitical headlines. The United States announced it had reached a limited trade agreement with China, but China has yet to confirm it has agreed to a deal and President Trump disputed reports of tariff rollbacks. Other reports indicate that China is concerned about the level of agriculture purchases in the agreement, and there is still no official announcement whether the December 15 tariff hike has been pushed off. Overseas, Conservative Party leader Boris Johnson won a convincing majority in the United Kingdom’s (U.K.) general election on Thursday, opening up a path for him to push through his deal to remove the U.K. from the European Union (Brexit).

A day of new highs. Trade and geopolitical breakthroughs seeped through U.S. stocks late on Thursday, boosting the S&P 500 Index to a fresh record high. The NYSE Composite Index also made its first new high since January 2018. However, the S&P 500 Financials Sector Index stole the show, breaking out to a new record high and officially eclipsing its February 2007 peak. Financials was the top performing sector on the day, and it’s now outperformed the S&P 500 by nearly 7% since mid-August. Real estate was the worst performing sector on Thursday, highlighting the market’s continued rotation from defensives into cyclical leadership.

Markets cheer Johnson’s victory. Global markets are cheering Johnson’s convincing U.K. election victory. The FTSE 100 Index of U.K. stocks jumped the most since July on the news, while the British pound climbed to a 1.5-year high versus the U.S. dollar. Investors are optimistic right now about the prospects for Brexit, but the actual execution could be a trickier proposition for the British and broader European economies. Today on the LPL Research blog, we’ll dig into the updated timeline for Brexit, and what Johnson’s victory could mean for global markets and the economy.

Cooling consumer data. Consumer spending may be slowing during the holiday season, according to November retail sales data. Retail sales rose 0.2% in November, below consensus estimates for a 0.5% gain. Control group sales, a cleaner measure of retail sales’ contribution to gross domestic product, rose 0.1%. Consumer activity may have cooled in November after a strong start to the fourth quarter, but we continue to expect the consumer to power economic growth going forward.

 

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