Weekly Market Recap

Week ended August 16

Market-moving news

Market-moving news

Market-moving news
Jagged edge

Stocks seesawed between big daily losses and gains, as the S&P 500 changed more than 1% on four of five trading days. The biggest move came on Wednesday, when the index dropped nearly 3%—the second-worst decline year to date. For the week overall, stocks fell only modestly, with the major indexes losing around 1%.

Market-moving news
Inversion aversion

Much of the week’s volatility was driven by a bond market phenomenon that hadn’t been seen in more than a decade. The yield of the 10-year U.S. Treasury bond fell on Wednesday to 1.60%, below the yield of the 2-year Treasury. The last time there was an inversion between the 2- and 10-year yields was in 2007, prior to the global financial crisis.  

Market-moving news
Weak indicators

Wednesday’s 800-point plunge in the Dow was fueled in part by worse-than-expected data from two of the world’s biggest economies. Germany’s GDP contracted slightly in the second quarter amid further declines in exports, while China’s factory output was below expectations in July. 

Market-moving news
Retail therapy

The week’s bleak economic news was partly offset by a monthly U.S. retail sales report that exceeded expectations. Strong quarterly results from several major U.S. retailers also helped to bolster the case that consumer spending remains strong, despite recent weakness in business spending. 

Market-moving news
Trade concession

Stocks rallied on Tuesday after the Trump administration sought to ease the recent escalation in trade tensions with China. The administration partially suspended its latest round of tariff increases, pushing back the effective date for tariffs on about $156 billion in Chinese goods from September 1 to December 15.

Market-moving news
Tariff talk

As earnings season wraps up, a growing number of executives appear to be concerned about the potential impact of the U.S.-China trade conflict on their businesses. The word “tariffs” was mentioned in 28% of second-quarter earnings conference calls with analysts, according to transcripts reviewed by FactSet that cover earnings reports issued through August 8. That’s up from 21% at the same point in the previous quarter’s earnings season. 

Market-moving news
Yield differential

The recent decline in bond yields has made dividend-paying stocks look relatively attractive as potential sources of income. Around 60% of stocks in the S&P 500 currently offer a dividend yield of at least 1.7%, according to FactSet. That’s above the current yield of the 10-year U.S. Treasury bond, which fell below that threshold on August 12.

 

Market-moving news
Policy talk

Investors will be closely watching for indications of a possible monetary policy shift when Federal Reserve Chairman Jerome Powell delivers a speech on Friday at an annual Fed symposium in Jackson Hole, Wyoming. On Wednesday, the Fed is set to release minutes from its most recent policy meeting, when it cut rates for the first time in more than a decade. 

The week ahead: August 19-23

Monday

  • No major reports scheduled 

Tuesday

  • No major reports scheduled 

Wednesday

  • Release of minutes from July 30–31 meeting of the U.S. Federal Reserve Board
  • Existing home sales, National Association of Realtors

 

Thursday

  • The Conference Board Leading Economic Index for the U.S. 

Friday

  • U.S. Federal Reserve Chairman Jerome Powell speaks in Jackson Hole, Wyoming
  • New home sales, U.S. Census Bureau 
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 8/16/19
1 week
-1.4-1.0-0.7 Large
-1.5-1.3-1.1 Mid
-1.4-1.2-1.1 Small
Value Core Growth
YTD
12.517.021.5 Large
13.718.425.3 Mid
7.011.716.3 Small
Value Core Growth
Index/market total returns as of 8/16/19 (%)
Close Week YTD
Dow Jones Industrial Average 25,886.0 -1.5 12.8
NASDAQ Composite Index 7,896.0 -0.8 19.0
S&P 500 Index 2,888.7 -0.9 16.7
MSCI EAFE Index 1,817.4 -1.5 7.8
Cboe Volatility Index 18.5 2.8 -27.2
International/developed (%)
1 week YTD
EAFE -1.5 8.2
Europe -1.2 9.4
France -1.4 11.3
Germany -2.2 5.3
Italy -0.9 10.8
Japan -1.9 4.9
Spain -1.7 1.6
Switzerland -0.8 22.2
U.K. -1.0 4.0
Emerging markets (%)
1 week YTD
EM -1.0 2.6
Brazil -5.2 10.0
China 1.4 6.0
India -0.9 3.3
Indonesia -1.5 3.3
Korea -0.2 -9.1
Mexico -3.2 -3.9
Russia -4.1 20.5
Taiwan -0.7 9.1
S&P 500 sectors (%)
1 week YTD
S&P 500 Index -0.9 16.7
Communication services -1.0 19.6
Consumer discretionary -1.9 18.1
Consumer staples 1.6 20.6
Energy -3.3 1.3
Financials -2.1 12.8
Healthcare -1.1 5.6
Industrials -1.5 16.6
Information tech -0.2 27.3
Materials -2.0 13.4
Real estate 0.4 26.5
Utilities 0.8 17.9

Fixed income, currencies, and commodities

U.S. fixed-income style total returns (%) as of 8/16/19
1 week
0.10.64.2 Large
0.30.52.0 Mid Quality
-0.2-0.1-0.4 Small
Value Core Growth
INTEREST-RATE SENSITIVITY
YTD
2.65.622.1 Large
3.26.223.3 Mid Quality
5.39.815.6 Small
Value Core Growth
INTEREST-RATE SENSITIVITY
U.S. Treasury bond yields as of 8/16/19 (%)
END OF WEEK PRIOR YEAR END YTD CHANGE (BPS)
2 Yr 1.47 2.21 -74
10 Yr 1.54 2.39 -85
30 Yr 2.00 2.82 -82
2-10 spread 0.07 0.18 -12
10-30 spread 0.46 0.43 +3
U.S. bond sector total returns (%)
1 week YTD
Aggregate 1.0 8.9
Bank loans -0.3 6.7
Convertible 0.4 13.4
Corporate 1.0 14.1
High yield -0.2 6.7
MBS 0.3 5.3
Municipal 0.5 7.6
Preferreds 1.0 15.0
TIPS 0.6 8.6
Treasury 1.3 8.5
Global bond total returns (%)
1 week YTD
EM Local -0.7 6.6
EMD USD -0.7 12.7
Global Agg 0.5 7.3
Global Agg Ex-U.S. 0.3 6.5
Multiverse 0.4 7.4
Commodities (%)
1 week YTD
BBG Com Ind -0.8 1.6
Oil (WTI) 0.6 18.6
Gold -0.5 17.9
Currencies (USD) (%)
1 week YTD
EM FX -0.8 0.8
AUD -0.4 -3.7
CAD -0.5 2.7
CHF -0.6 0.7
EUR -0.9 -2.9
GBP 0.5 -4.7
JPY -0.7 3.1

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 7/31/19

as tracked by Strategic Insight
MONTH 12 Month ASSETS
U.S. equity -1.0 3.9 8,554.7
Sector equity -3.1 -56.3 889.1
Allocation -2.7 -69.7 1,258.9
International equity -2.4 6.7 3,127.7
Alternative -1.1 -21.4 183.5
Commodities 2.7 2.9 99.5
Taxable bond 39.6 198.2 4,108.5
Municipal bond 10.2 54.0 803.9
Total all long-term funds 41.5 81.7 19,038.6

Leading Morningstar fund categories by monthly net flows ($B) as of 7/31/19

MONTH 12 Month ASSETS
Intermediate Core Bond 12.4 53.0 890.0
Large Blend 10.2 107.2 3,801.2
Intermediate Core-Plus Bond 8.0 19.3 685.0
Intermediate Government 4.9 25.1 163.6
Short-Term Bond 4.3 25.2 419.8

Lagging Morningstar fund categories by monthly net flows ($B) as of 7/31/19

MONTH 12 Month ASSETS
Large Growth -8.6 -51.3 1,788.1
Bank Loan -2.7 -41.1 107.7
Health -2.5 -3.9 167.6
World Allocation -1.9 -30.8 283.8
Diversified Emerging Mkts -1.7 23.2 559.0
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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