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.
Most of the action took place in Europe this week, but a comment from Federal Reserve Chair Jerome Powell took the markets by surprise. The European Union and Britain sealed the Brexit deal at a summit this Sunday, potentially paving the way for an orderly exit from the alliance. In case Britain’s members of Parliament consider voting against the deal, Bank of England Governor Mark Carney delivered a stark warning about the potential costs of a disorderly withdrawal. He said the economic output may be lower by as much as 10% in the next 15 years and the pound could drop by 25%, below the U.S. dollar and the euro. However, Carney made clear his main scenario was not for a chaotic exit. Carney’s European counterpart Mario Draghi maintained his hawkish stance on monetary policy this week, stressing that the loss of growth momentum will not derail his ongoing tightening plans. Draghi said that a gradual slowdown is normal as the expansion reaches its final innings. Across the Atlantic, U.S. Federal Reserve Chair Jerome Powell said interest rates are “just below” the so-called neutral point, spurring bets that the central bank will pause interest rate hikes soon to see how the economy copes. His comments triggered a rally in stocks and a weakening of the dollar. U.S. President Donald Trump, who has been criticizing Powell for raising interest rates, should be pleased. The U.S. economy expanded by an annualized 3.5% in the third quarter, a marked slowdown compared to the previous quarter, when GDP increased by 4.2%. Still, the growth was well above the economy’s potential of 2% estimated by economists, and largely in line with forecasts. A range of European purchasing managers’ indexes lost strength in November. Germany’s manufacturing and services indexes dropped to 51.6 and 53.6, respectively. In the prior month, manufacturing PMI came in at 52.2, while the services PMI stood at 54.7 Crude oil inventories were up 3.6 million in the week ended November 23, the tenth consecutive weekly increase. In the prior week, crude stockpiles advanced by 4.9 million.
Risk Appetite Review
Markets reversed their feeble performance from the past week. Risk assets (SPHB B-) were the best performers, rising nearly 5%. The Fed Chair’s comments that interest rates were approaching their neutral zone – meaning they neither stimulate nor dampen economic activity – helped. The broad market itself (SPY A) advanced more than 4% this week thanks to the return of optimism. Low volatility (SPLV A) recorded the smallest gains, up 2.31%.
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Major Index Review
Technology stocks were the most favored among major indexes, with (QQQ A-) jumping 5.69%. iShares MSCI EAFE Index Fund (EFA A), an instrument providing exposure to European and Australasian markets, was the poorest performer with a gain of 2.24%. (EFA A) is also the worst performer for the rolling month, up 2.69%. For the rolling month, emerging markets (EEM A-) were the best performers with a rise of 7.56%.
To see how these indices performed a week before last, check out ETF Scorecard: November 23 Edition.
The healthcare sector (XLV A) posted the strongest performance this week amid a broad-based advance. (XLV A) is up 5.54% for the past five days and is the second-best performer for the rolling month. The materials sector (XLB A) is the king for the past 30 days with a solid rise of 7.65%. Amid an improving sentiment, utilities are the worst performers for the week, perhaps unsurprisingly. (XLU A) rose a tepid 1.16%. For the rolling month, the technology sector (XLK A) is the worst performer, edging up 0.63%.
Foreign Equity Review
India (EPI B+) is again the best performer for the week and the rolling month, as it led gains across Asian stock markets after the Fed Chair’s comments triggered speculation of foreign capital inflows into the region. (EPI B+) is up 3.32% for the week and an impressive 10.53% for the rolling month. On the other side of the spectrum is Britain, which is facing the possibility of a disorderly Brexit as there is a lack of majority in Parliament for the recently agreed deal with the European Union. (EWG B+) was still up 1.25% for the week and among the worst performers for the rolling month. For the rolling month, Germany (EWG B+) is the worst performer and the only asset to post a gain below 1%.
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After a few tumultuous weeks, commodities posted low volatility. Natural gas (UNG B-) was again the best performer both for the week and the rolling month, up 3.26% and 40.71%, respectively. Meanwhile, oil (USO A) was the worst performer for the week and the rolling month, down 0.09% and 21.8%, respectively.
The European shared currency (FXE A) declined 1.73% for the week, the worst performer from the pack. The Australian dollar (FXA A-) posted the biggest advances for the week and the rolling month, rising 1.13% and 3.11%, respectively. The Japanese yen (FXY C+) dropped 0.47% for the past 30 days, representing the worst performance.
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Disclosure: No positions at time of writing.