Weekly Market Recap

Week ended December 7

Market-moving news

Market-moving news

Market-moving news
Swift reversal

The S&P 500 dropped nearly 5%, erasing all of the prior week’s strong gains, as the stock market extended its recent cycle of alternating between steep weekly losses and recovery rallies. Much of the latest week’s decline came on Tuesday, when the major indexes plunged more than 3%. 

Market-moving news
Market mood swings

Stocks have been unable to maintain consistent direction for more than a few days at a time since the S&P 500 hit a record high on September 20. Since then, the market has recorded three steep declines followed by three partial or full recoveries. Overall, the index is down about 10% from its record and nearly 2% below its year-end 2017 level.   

Market-moving news
International bear markets

The sell-off has been deeper in many overseas equity markets than in the United States. Germany’s main benchmark fell into a bear market on Thursday when it dropped 20% below its level of late January. Other markets that have recently entered bear territory include China, Italy, and South Korea. 

Market-moving news
Trade drama

Sentiment over the U.S.-China trade dispute shifted following talks between the two countries at a global summit. Initial optimism over a 90-day truce in tariff increases gave way to pessimism as it became apparent that the sides remained far apart. The U.S.-requested arrest of a Chinese technology company executive visiting Canada added further uncertainty.  

Market-moving news
Inversion incursion

The yield curve for the U.S. Treasury bond market showed evidence of inverting for the first time in more than a decade, when the yield of the 5-year note on Tuesday dropped below the yields for notes maturing in 2 and 3 years. Historically, instances of shorter-term debt yielding more than longer-term debt have typically preceded recessions.  

Market-moving news
Mixed results

The 155,000 new jobs that the U.S. economy generated last month fell short of most economists’ expectations, but Friday’s labor market report was solid in other respects. The unemployment rate remained near a 50-year low of 3.7% while wages climbed at an annual rate of 3.1%. 

Crude awakening

Crude oil prices recovered some of their recent losses as the OPEC consortium of oil-producing countries and Russia agreed to reduce their production targets. Following the announcement, U.S. crude prices climbed about 2% on Friday to their highest levels in two weeks.

Brexit vote ahead

The British House of Commons was scheduled to vote Tuesday on whether to accept the Brexit agreement that Prime Minister Theresa May recently negotiated with the European Union. The outcome was expected to have significant implications for British politics, the global economy, and world financial markets. 

The week ahead: December 3-7

Monday 

  • Job Openings and Labor Turnover Survey, U.S. Bureau of Labor Statistics

 

 

 

Tuesday

  • Producer Price Index, U.S. Bureau of Labor Statistics

 

Wednesday

  • Consumer Price Index, U.S. Bureau of Labor Statistics
  • Federal budget, U.S. Department of the Treasury

Thursday

  • Export and import prices, U.S. Bureau of Labor Statistics

Friday

  • Retail sales, U.S. Census Bureau
  • Business inventories, U.S. Census Bureau 
  • Industrial production and capacity utilization, U.S. Federal Reserve 

Important disclosures

Unless otherwise noted, all data is from FactSet.

The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. This does not illustrate the performance of any John Hancock fund. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.

The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. It is not possible to invest directly in an index.

The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (BPS).  One hundred basis points equals one percent.

Oil prices are represented by West Texas Intermediate (WTI) crude oil.

The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.

 

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Investment returns

Equities

U.S. equity size and style total returns (%) as of 12/7/18
1 week
-4.3-4.5-4.8 Large
-3.8-4.3-5.2 Mid
-5.0-5.5-6.0 Small
Value Core Growth
YTD
-2.90.02.6 Large
-5.7-3.4-0.7 Mid
-5.9-4.6-3.5 Small
Value Core Growth
Index/market total returns as of 12/7/18 (%)
Close Week YTD
Dow Jones Industrial Average 24,389.0 -3.6 0.9
NASDAQ Composite Index 6,969.3 -4.1 2.0
S&P 500 Index 2,633.1 -4.6 0.3
MSCI EAFE Index 1,768.5 -2.3 -11.0
Cboe Volatility Index 23.2 28.2 110.1
International/developed (%)
1 week YTD
EAFE -2.3 -11.0
Europe -2.7 -12.7
France -3.2 -10.7
Germany -3.5 -19.7
Italy -1.6 -15.4
Japan -1.9 -8.1
Spain -2.4 -14.5
Switzerland -2.3 -5.1
U.K. -2.9 -13.3
Emerging markets (%)
1 week YTD
EM -1.3 -13.1
Brazil -1.1 0.5
China -2.3 -15.5
India -3.5 -10.4
Indonesia 0.1 -9.4
Korea -0.8 -19.9
Mexico 1.3 -16.9
Russia 3.7 7.6
Taiwan -2.1 -8.8
S&P 500 sectors (%)
1 week YTD
S&P 500 Index -4.6 0.3
Communication services -4.1 -9.5
Consumer discretionary -4.2 5.4
Consumer staples -2.9 -2.2
Energy -3.0 -9.0
Financials -7.0 -8.8
Healthcare -4.6 11.1
Industrials -6.3 -9.0
Information tech -5.0 3.4
Materials -5.1 -13.1
Real estate 0.3 5.9
Utilities 1.5 10.1

Fixed income, currencies, and commodities

U.S. fixed-income style total returns (%) as of 12/7/18
1 week
0.10.63.0 Large
0.20.61.5 Mid Quality
-0.1-0.1-0.2 Small
Value Core Growth
INTEREST RATE SENSITIVITY
YTD
1.50.5-4.0 Large
1.00.0-7.8 Mid Quality
3.1-0.2-5.2 Small
Value Core Growth
INTEREST RATE SENSITIVITY
U.S. Treasury bond yields as of 12/7/18 (%)
END OF WEEK PRIOR YEAR END YTD CHANGE (BPS)
2 Yr 2.70 1.88 +82
10 Yr 2.85 2.41 +44
30 Yr 3.14 2.74 +40
2-10 spread 0.14 0.53 -38
10-30 spread 0.29 0.33 -4
U.S. bond sector total returns (%)
1 week YTD
Aggregate 0.9 -1.0
Bank loans 0.1 2.2
Convertible -0.8 2.6
Corporate 0.7 -3.0
High yield -0.1 -0.2
MBS 0.8 0.0
Municipal 0.7 0.8
Preferreds -0.3 -5.5
TIPS 0.6 -1.2
Treasury 1.0 -0.3
Global bond total returns (%)
1 week YTD
EM Local 0.3 -8.8
EMD USD 0.8 -4.7
Global Agg 0.9 -2.3
Global Agg Ex-U.S. 0.9 -3.1
Multiverse 0.8 -2.4
Commodities (%)
1 week YTD
BBG Com Ind 1.2 -3.6
Oil (WTI) 3.3 -7.9
Gold 2.2 -5.1
Currencies (USD) (%)
1 week YTD
EM FX -0.5 -5.5
AUD -1.2 -7.7
CAD 0.0 -5.7
CHF 0.7 -1.8
EUR 0.6 -5.1
GBP 0.0 -5.7
JPY 0.8 0.0

U.S. economy

GDP

Jobs

Inflation

Ex-U.S.

Regions/countries

Fund industry overview

Total net flows: open-end funds and ETFs ($B) as of 10/31/18

as tracked by Strategic Insight
MONTH 12 Month ASSETS
U.S. equity 6.1 -10.3 7,757.6
Sector equity -12.9 -5.4 851.7
Allocation -9.2 -51.1 1,217.9
International equity 4.6 127.6 2,911.9
Alternative 0.4 -3.5 197.7
Commodities 0.6 2.7 88.7
Taxable bond -23.3 225.7 3,699.1
Municipal bond -5.2 12.5 700.2
Total all long-term funds -40.6 266.3 17,442.7

Leading Morningstar fund categories by monthly net flows ($B) as of 10/31/18

MONTH 12 Month ASSETS
Large Blend 13.7 47.2 3,319.4
Ultrashort Bond 12.4 75.2 204.3
World Bond 10.0 33.9 267.1
Foreign Large Blend 7.5 104.4 1,075.1
Trading--Leveraged Equity 3.6 3.9 26.4

Lagging Morningstar fund categories by monthly net flows ($B) as of 10/31/18

MONTH 12 Month ASSETS
Intermediate-Term Bond -29.8 58.4 1,365.2
High Yield Bond -7.5 -35.6 272.8
World Allocation -3.7 -15.9 284.1
Real Estate -3.4 -9.5 144.7
Technology -3.4 8.5 141.0
Important disclosures

Unless otherwise noted, all data is from FactSet.

The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. This does not illustrate the performance of any John Hancock fund. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.

The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. It is not possible to invest directly in an index.

The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (BPS).  One hundred basis points equals one percent.

Oil prices are represented by West Texas Intermediate (WTI) crude oil.

The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.

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