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  • November 26, 2018

Week in Review

Week Ending: Friday, November 23, 2018

Recap & Commentary

Markets ended the week lower, dragged down by continued concerns about trade and further declines in oil prices. Early reads on Thanksgiving weekend shopping were positive, suggesting that consumers are in a festive mood entering the all-important holiday shopping season.

Markets fell at the beginning of the week, as investors, hoping that the annual Asia-Pacific Economic Cooperation (APEC) summit might provide positive signals about relations between the U.S. and China, came away disappointed. Instead, the two countries used the summit to air their grievances about one another, leaving investors pessimistic about the likelihood that the two countries will be able to reach an agreement on the current trade dispute at the upcoming G-20 Summit.

Oil prices remained in free-fall, dropping nearly 11% to end the week at ~$50/bl, the lowest level in over a year. While rising supplies have impacted prices, investors appear to be growing increasingly concerned that continued price declines are signaling a slowing in global economic growth. Since reaching a recent high of $76/bl in early October, oil prices have fallen by -34%.

According to Adobe Analytics, Black Friday online sales rose 23.6% from last year to $6.2B.  Purchases made from smartphones topped $2B for the first time.  Separately, sales associated with Small-Business Saturday rose 24% from a year ago to $3B.

 

Economic Bullet Points

Broad Economy—The index of leading economic indicators (LEI) posted a slight positive 0.1% increase in October, primarily due to improving consumer expectations for business conditions, the yield spread, and favorable credit readings which helped offset sharp declines in stock prices and a rise in unemployment claims. Importantly, the positive offsets are upward revisions to the prior two months, both one-tenth higher at strong gains of 0.6% and 0.5%, respectively. In the six month period ending October 2018, the LEI increased 2.6%, which is slower than the 3.2% growth rate over the previous six months.

Housing—Several housing indicators released during the week pointed to a continued slowdown in the housing sector. Notably, the biggest surprise was the marked eight-point drop in the National Association of Homebuilders/Wells Fargo Housing Market Index in November, its largest drop since February 2014, driven by declines in builder’s expectations of both current and future sales. Additionally, the expected buyer traffic index dropped below 50, which means a majority of builders see conditions softening in the coming months. Conversely, housing starts and existing home sales data rose in October, up 1.5% and 1.4%, respectively. All of the gains were concentrated in the multifamily components of the indexes, while the single-family components continued to struggle. Overall, rising home prices and mortgage rates continue to weigh on the housing sector.

Durable Goods Orders declined -4.4% in October, while September’s gain was revised downwards –0.9% to –0.1%. Core capital goods also disappointed, showing no growth from the prior month.  The three-month average annualized growth rate is now the lowest since March.

 

Of Note

Ballooning Student Loan Debt- According to the Federal Reserve of New York, outstanding student loan debt was $360B as of March 2005, doubled to $720B as of December 2009, and now has doubled again to $1.44T as of September 2018.

Market Indices Week of 11/23

S&P 500                    -3.8%

Russell 2000             -2.5%

MSCI EAFE              -1.1%

MSCI EM                    -1.7%

Commodities             -2.9%

Barclay’s Agg.            0.0%

US Dollar Index         0.5%

10-Yr Yield                   3.06%

Oil ($/bl)                          $50

Gold ($/oz)                 $1,224

The Week Ahead

  • GDP
  • Corporate Profits
  • Personal Income and Outlays
  • New Home Sales
  • International Trade in Goods 
  • Jobless Claims
  • Consumer Confidence

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