What we think

Newsletter: In the Markets – Week-Ending June 2^nd, 2017

Crystal Brook Advisors

We Make Financial Planning Crystal Clear™

United States:  Consistent with several regional purchasing managers (Chicago, Philadelphia) indices released over the past few weeks, growth in the manufacturing sector continues to improve. The May ISM came in at 54.9 (top graph). When we examine the graph, we witness how much intracycle volatility is characteristic of manufacturing sentiment, so ups and downs are endemic to this survey. We estimate industrial production up 2.0-2.5 percent in the second half of 2017. (1)  The production index came in at 57.1 and is now slightly above its twelve-month average. Moreover, the pipeline for activity remains positive as new orders were up at 59.5. Strength in new orders (middle graph) stems, in part, from the improved global backdrop. Fourteen sectors reported a gain in orders including paper, primary metals, and machinery. Export orders came in at 57.5, with 11 industries reporting growth including textiles, wood, and paper. While not seasonally adjusted, the index indicates continued gains in exports. (1)

Europe:  Finland has shaken off its “sick man of Europe” tag by recording six consecutive quarters of economic growth for the first time since the global financial crisis. (2)  Economic growth in the first quarter was 1.2 percent over the previous three months — the highest rate since the end of 2010 — and expanded 2.7 percent year on year, faster than economies such as Germany and Sweden. (2)

Asia:  Asian markets closed in the green on Friday, after the release of strong private payrolls stateside and as President Donald Trump announced the U.S. would be withdrawing from the Paris climate accord. (3)  Trump said on Thursday that the U.S. would withdraw from the climate agreement, but wanted to negotiate for new arrangements that were more “fair” to the U.S. In response, European leaders said in a statement that the Paris agreement “cannot be renegotiated.” The agreement aims to ensure global temperatures do not rise more than 2 degrees Celsius above pre-industrial levels. (3)

Latin America:  Tough conditions in some of Latin America’s biggest economies created a difficult environment for investors in 2016, but Mexico City-based BBVA profited from adversity by offering products that reflected diverse views on the outlook for growth and interest rates. (4)  “Last year was a period of change for Latam investors. Many were looking to do new things in new asset classes,” says Manuel Meza, managing director for global structured solutions at BBVA. “For example, in Mexico we saw the central bank raise interest rates sharply, which gave a boost to the structured note business, while the more positive economic outlook in the US led to a sharp rise in demand for exposure to US equities.” (4)

Monday 5/29 

• Markets Closed.

Tuesday 5/30

• The Standard & Poor’s 500 index sank 2.91 points, or 0.1 percent, to 2,412.91. (5)

Wednesday 5/31

• Oil dropped sharply over concerns about global output, with futures down 2.9% and the popular Energy Select Sector SPDR ETF (NYSEMKT:XLE) posting a 0.4% decline. Financial stocks took a tumble as well, with the Financial Select Sector SPDR ETF (NYSEMKT:XLF) losing 0.9%, giving up all of its gains for 2017. (6)

Thursday 6/1

• The composite and the S&P climbed almost 0.8%, their best one-day gains since April 24. Both made all-time highs. The Dow Jones industrial average added nearly 0.7%, and was left a bit below a new high. Goldman Sachs (GS), Wednesday’s big Dow loser, and UnitedHealth (UNH) were the top gainers in the Dow industrials. (7)

Friday 6/2

• The S&P 500 index SPX, +0.30%  hit an intraday record at 2,437.58, and was recently trading up 7 points, or 0.3% higher at just under 2,437. Of the 11 main sectors, seven were trading higher. Energy shares were leading the losses, down 1.1%, largely following lower oil prices. Financials stocks were the other area of weakness on Wall Street, with the sector trading 0.2% lower. (8)

Contributor: Thomas Padula

Source:

(1) Wells Fargo Economic Group

(2) Financial Times

(3) CNBC

(4) Risk.net

(5) Fox Business

(6) The Motley Fool

(7) Investor’s Business Daily

(8) Market Watch