Taking into account both the US and worldwide markets, investors in all types of securities can find factors that are influencing their investments and have an impact on their strategies.
In the US, durable goods orders declined by 1.6% in March after increasing 0.4% in February. This decrease was driven primarily by a drop in orders for transportation equipment which fell 5.1%. The weakness in the durable goods number suggests that the industrial sector of the economy is still soft and has been a drag on economic growth. On the housing front, existing home sales dropped 2.2% to an annualized rate of 5.21 million units, falling short of expectations of a rise of 0.5%. This indicates that higher mortgage rates along with a lack of inventory are continuing to weigh on the housing market. In other US economic news, nonfarm payrolls rose by 196,000 in March, beating analyst expectations of 175,000 and signaling a continued tightening of the labor market.
Globally, China’s exports surged 14.2% in March, far exceeding expectations and indicating that the Chinese economy is stabilizing. The German economy contracted by 0.1% in the first quarter of 2019 due to declines in exports. This contraction in economic activity could raise concerns of a potential recession in the Eurozone. Central banks around the world remain in an accommodative stance, with the European Central Bank keeping interest rates steady at 0% while remaining open to new stimulus measures if needed.
The stock market continues to trade near record highs, as the tech heavy Nasdaq hit a new high this week. The Dow rose 0.9%, the S&P 500 gained 0.8%, and the Nasdaq increased by 1.7% over the course of the week. The rally in the market was largely driven by the FAANG stocks (Facebook, Amazon, Apple, Netflix, Google). Overseas, most Asian markets ended the week higher with Japan’s Nikkei 225 up 0.2%.
Overall, the market watch for April 22nd, 2019 provides a mixed picture of the current global economy. In the US, the labor market continues to remain tight with nonfarm payrolls adding 196,000 jobs in March, but the durable goods number showed weakness in the industrial sector of the economy. On a global level, Chinese exports surged and the ECB kept rates unchanged, although Germany’s GDP contracted in the first quarter of 2019 raising concerns of a potential recession in the Eurozone. Despite these worries, the stock market rallied with the Nasdaq hitting a new high this week, led by the five tech giants referred to as FAANG stocks.
Overall, the current market environment presents both opportunities and risks for investors. On the one hand, the U.S. employment numbers continues to remain strong, suggesting that economic growth is healthy. Additionally, Chinese exports have surged, signaling a stabilization of the world’s second largest economy. On the other hand, weak durable goods numbers indicate that the industrial sector of the economy may still be facing headwinds. In addition, Germany’s contraction in the first quarter of 2019 has raised concerns of a potential recession in the Eurozone. Investors should be aware of these factors when constructing their portfolios and making investment decisions in order to mitigate risks and take advantage of potential upside.
This article was contributed on Oct 21, 2023