Economic fundamentals stole the spotlight from trade-deal expectations last week, driving global stocks higher. International stocks outperformed domestic on the back of the fourth straight month of improvement in global manufacturing PMI, a proxy for global growth. The surveys are consistent with a still soft but improving demand environment, which suggests to us that the manufacturing downcycle may have run its course. U.S. stocks had their best daily gain in over a month on Friday following the November jobs report, which showed strong job gains, rising wages, and a return to a 50-year-low unemployment rate. This, combined with a seven-month high in consumer sentiment, provides further evidence that the U.S. economy finishes the year on solid footing.
A Case for (Cautious) Optimism for Markets in December
The market, in the first week of December, made a strong case for being optimistic that the bull market continues, with stocks rising 0.9% on Friday. What a difference a year makes! In contrast, the first week of December 2018 started off much rockier. Stocks slumped as a section of the yield curve inverted, unnerving investors with recession worries. Adding to market woes, last year the November jobs market missed expectations, and trade negotiations, which had been promising, started to unravel. That first week proved prescient – later that month stocks slid almost 20% to near bear-market territory.
This week has shaped up to be altogether different from last year. With recession fears at bay for now, there is reason for cautious optimism ahead.
The key to investing over the long term is not removing risk and uncertainty but managing it. Market optimism can come and go. Keeping a long-term perspective, a well-diversified portfolio, and the appropriate mix of equities and bonds for?your comfort with risk will help?you stay focused on the fundamental drivers of portfolio returns over time, rather than short-lived market moves.
Sources: 1. FactSet, 2. Ned Davis Research
Nela Richardson, PhD
|Dow Jones Industrial Average||28,015||-0.1%||20.1%|
|S&P 500 Index||3,146||0.2%||25.5%|
|10-yr Treasury Yield||1.84%||0.06%||-0.84%|
Source: Morningstar, 12/06/19.? Bonds represented by the iShares Core U.S. Aggregate Bond ETF. Past performance does not guarantee future results.?
The Week Ahead
The Weekly Market Update is published every Friday, after U.S. markets close.
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