To help investors keep up with the markets, we present our ETF Scorecard. The Scorecard takes a step back and looks at how various asset classes across the globe are performing. The weekly performance is from last Friday’s open to this week’s Thursday close.
Third-quarter U.S. GDP rose by 3.5%, beating estimates of 3.3%, as the economy is still benefiting from the government tax cuts announced earlier this year. The U.S. economy expanded at a pace of 4.2% in the previous quarter. The economy is growing at a healthy pace, with inflation in line, but the 4% drop in residential investment in the third quarter is a reason for concern. Bank of England kept its monetary policy steady, but said future interest rate rises depend on the U.K. government clinching a deal with the EU on Brexit. Governor Mark Carney said the bank would need to raise interest rates to 1.5% over the next three years to keep inflation under control. Bank of Japan has caved to pessimism about its goal of attaining 2% inflation. The central bank downgraded economic forecasts and said inflation will rise by 0.9% compared to the 1.1 it had predicted previously. Governor Haruhiko Kuroda raised concerns about the lingering trade dispute between China and the U.S., although he admitted the effects on the economy have so far been limited. European annual inflation grew by 2.2% in October, a little above the European Central Bank’s target, up from 2.1% in the prior month. As widely expected, a large part of the price increase was driven by energy prices, followed by food and alcohol. Core inflation, which strips out volatile food and energy prices, was up 1.1%, in line with expectations. ADP predicted the U.S. economy added 227,000 jobs in October, beating forecasts of 188,000 and well above the prior month’s showing of 218,000. U.S. crude oil inventories have continued to rise this week, although the pace of growth slowed. For the week ended October 26, crude stockpiles jumped 3.2 million barrels, the sixth consecutive week of gains. In the prior week, supplies rose by 6.3 million barrels. Sentiment in the U.K. manufacturing sector continues to deteriorate. In October, purchasing managers’ index PMI dropped from 53.6 to 51.1, the lowest level since August 2016. The manufacturing sector in the U.S. is in much better shape; although, it is worsening. Institute for Supply Management’s PMI declined from 59.8 to 57.7 in October. Analysts had expected the index to come in at 59.
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Risk Appetite Review
Markets started to reverse declines, a sign the sell-off may be over. The broad market (SPY A) rose 2.85% for the week, as investor optimism returned. Risk assets (SPHB B-) are the best performers for the week with an advance of 6.45%. Low volatility (SPLV A) posted the worst performance, up just 0.86%.
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Major Index Review
Major indexes were all up. News of a possible trade deal between the U.S. and China provided additional thrust to the markets, which were already recovering from a sell-off. Emerging markets (EEM A-) were the top performers for the week, up nearly 6%%. (EEM A-)’s weekly performance landed it in first place on the performance list for the rolling month as well, down 4.27%. Amid a broad-based recovery in stocks, Dow Jones (DIA A-), which for weeks was topping the performance list, is the worst performer with an advance of 2.57%. For the rolling month, the small-cap index (IWM B+) fell the most, down 7.64%.
To see how these indices performed a week before last, check out ETF Scorecard: October 26 Edition.
The materials sector (XLB A) posted the strongest gains this week, surging as much as 7.22%, partly thanks to solid earnings and buybacks announced by DowDuPont, which makes up a fifth of the index. Utilities (XLU A) was the only sector in sell-off mode, as the index largely moves contrary to the broad market. For the rolling month, consumer staples (XLP A) beat all other sectors, rising nearly 3%. The energy sector (XLE A) tumbled more than 12% for the rolling month, representing the worst performance.
Foreign Equity Review
India (EPI B+) gained 6.3%, staging a recovery from a deep sell-off that engulfed global markets. A potential trade deal between the U.S. and China boosted sentiment across the table. Japanese equities (EWJ A), which sometimes act as a safe haven, rose 1.8%, the weakest gain from the pack as Bank of Japan downgraded its forecasts for economic growth and inflation. (EWJ A) is also the worst performer for the rolling month, down 9.3%. The only gainer for the month is Brazil (EWZ B+), with a 17.19% advance. The victory of Jair Bolsonaro in the presidential elections stirred optimism that he will implement liberal economic reforms.
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Commodities were mixed. Oil (USO A) continued to decline despite a broad recovery in stocks. Crude slumped 4.67% for the week and 15.61% for the rolling month. Natural gas (UNG B-), meanwhile, advanced 2.64% in the five days through Thursday and is the best performer. The agricultural fund (DBA A) is up 3.16% for the month, becoming the top performer.
The Australian dollar (FXA A-) rose 2.23% this week, representing the best performance from the pack. Meanwhile, the euro (FXE A) fell 1.47% this week due to a deteriorating economic picture. The euro is also the worst performer for the rolling month, down 1.2%. The U.S. dollar (UUP A) reversed some of the gains this week but remains the best performer for the rolling month, up 1.1%.
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Disclosure: No positions at time of writing.