In the following piece, Fifth Third’s Investment Management Group recaps the market and how it reacted to various events in the month of November. I hope you find this Financial Market Roundup helpful and informative.
The old saying that “money can’t buy you happiness” is probably true. But we also believe in another old saying, “don’t look a gift horse in the mouth.” Now that we are well into the holiday season we would like to take the opportunity to acknowledge the bounty of gifts currently being bestowed upon the U.S. consumer. A host of macro tailwinds are leaving more cash in our collective pockets and this will likely have significant implications for the global economy in the months and years ahead; granted, peace on earth would be preferred, but let’s take what we can get, shall we?
But before we talk about the good fortunes of the American consumer let’s see what happened to risky assets in November.
- The MSCI World Index, a broad measure of developed world’s stock markets rose 2.00 percent for the month.
- The S&P 500, a measure of large U.S. companies, rose 2.69 percent for the month.
- The MSCI Emerging Market Index, a broad measure of the emerging world’s stock markets, declined 1.05 percent for the month.
- The MSCI REIT Index rose 2.00 percent for the month.
- Gold declined 0.47 percent during the month.
The decline in energy prices is probably the most obvious positive development for the U.S. economy in 2014. The price of gasoline has fallen 35% in less than six months due to increased oil production, predominantly here at home, and a rising dollar. Shoppers are finding savings at the grocery store too. The Food and Agriculture Organization’s price index, which measures monthly price changes for a basket of cereals, dairy, meat and other products, fell for the seventh consecutive month in October, the longest continuous slide since the late 1990s.
Developments in foreign exchange markets are helping to pad consumers’ wallets as well. Easy monetary policy from the European Central Bank and the Bank of Japan has helped to boost the value of the dollar. This has led to lower import costs and increased purchasing power for Americans traveling abroad. The same easy-money policies, and slow growth, in Europe and Japan have kept global interest rates at historic lows. This is helping to keep a lid on Treasury yields here at home, despite our strengthening economy.
Americans are also seeing a substantial increase in the value of their homes and stock portfolios. As we currently stand, 2014 is looking to be yet another year where both housing and equity prices have risen. If that is the case, this will be the 6th consecutive year of positive S&P 500 total returns, with that index up over 200% from the 2009 lows. Perhaps the greatest consequence to the U.S. consumer lies with their prospects for finding a well-paying job, and we’ve seen considerable improvements here as well. Not only have we gained back all the jobs we lost during the financial crisis (and then some), but non-farm payroll increases are consistently coming in over 200K per month while initial jobless claims are at a fourteen year low.
Despite receiving a boost to their disposable income, U.S. shoppers posted less than spectacular retail numbers over the Thanksgiving weekend. The National Retail Federation reported that spending fell an estimated 11% compared to last year. However, business owners are hoping that the slower foot traffic in November will translate into more online sales in December†.
†Market commentary provided by Fifth Third Bank. *Source of
statistics is Bloomberg.com. Returns are calculated from market close on 10/31/14 through 11/30/14. This information is current as of the date of this
letter and the opinions expressed are subject to change at any time, based on
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MSCI EMF (Emerging
Markets Free) Index is a free float-adjusted market
capitalization index that is designed to measure equity market performance in
the global emerging markets. As of June 2006 the MSCI Emerging Markets Index
consisted of the following 25 emerging market country indices: Argentina,
Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India,
Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru,
Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
MSCI US REIT Index
is a free float- adjusted market capitalization weighted index that is
comprised of equity REITs that are included in the MSCI US Investable Market
2500 Index, with the exception of specialty equity REITs that do not generate a
majority of their revenue and income from real estate rental and leasing
operations. The index represents approximately 85% of the US REIT universe.
The MSCI World Index
is a free float-adjusted market capitalization weighted index that is designed
to measure the equity market performance of developed markets. The MSCI World
Index consists of the following 24 developed market country indices: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong,
Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United
is the U.S. dollar per Troy ounce.
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