Weekly Wrap-Up

Last Week In Markets: Feb 24 - Feb 28, 2020

Fisher investments recaps the biggest market, political and economic news from last week, including a correction for global equities due to rampant coronavirus fears and ongoing Brexit negotiations between the eurozone and United Kingdom.

Global equities experienced a historically bad week and fell into correction territory amid continued fears of the novel coronavirus’ potential impact on the global economy. However, while the coronavirus is certainly a human tragedy and will have some short-term economic impacts, the current decline has all of the classic features of a correction—a short, sharp drop of 10% or more accompanied by scary, seemingly plausible news stories. Corrections are common during bull markets (this is the ninth in this bull market alone), impossible to predict and usually end just as quickly as they begin. Corrections are very different from bear markets (fundamentally-driven, longer downturns of 20% or more) which typically begin with a slow, rolling top rather than the sharp drop we’ve recently observed. Staying disciplined and patient is imperative to not miss out on the rapid upside of the ”V-shaped” recovery typical of corrections. For additional commentary on our views of the novel coronavirus’ potential longer-term impact on the global economy and markets, please see our 2/24/2020 article “Thoughts on a Rocky Monday.” We continue to monitor this situation closely and will update you as appropriate. As always, if you have questions or concerns, please reach out to your Investment Counselor.

In the US, data were positive. The second estimate of Q4 2019 GDP read 2.1% q/q annualized, in line with expectations. Initial estimates for January durable goods orders showed a 0.2% m/m decline, a more modest decrease than expected. Additionally, stripping out more volatile transportation-related orders, preliminary estimates showed durable goods orders increasing 0.9% m/m. January new home sales increased modestly, beating expectations and rising to 764,000.

Data in Europe were light. January eurozone money supply (M3) was revised to 5.2% y/y, slightly below expectations. Outside of the novel coronavirus, headlines focused on ongoing negotiations between the European Union and United Kingdom regarding their post-Brexit trade agreement. For more commentary, please see our 2/26/2020 article, “What Tech and Skincare Teach About NoDeal Brexit.”

In Japan, January industrial production and retail sales increased 0.8% m/m and 0.59% m/m respectively. Imports and exports fell 3.5% y/y and 2.6% y/y respectively. The January unemployment rate rose slightly to 2.4%.

The Week Ahead:

The US, UK and eurozone release final February services and manufacturing Purchasing Mangers’ Indexes (PMIs). Japan announces preliminary estimates for the January LEI reading while China releases Markit/Caixin services and manufacturing PMIs.
