Published December 13, 2019
After a more than -20% decline from their peak during 2018, international stocks have worked their way back as shown in the chart below.
This week, they staged a new breakout to join the other indexes we have been reporting on in pushing upward.
The high-beta ETF comprised of more volatile, higher risk sectors like mid-cap tech stocks also joined the party this week.
In summary, the stock market rally that we have spent the past few weeks discussing continues to broaden out to more areas of the market. That is what you want to see in a healthy rally. We will continue riding this trend as long as it persists.
Investors will hear from both the U.S. and European central banks this week as well as digest results of the UK election, an event that will refresh the Brexit discussions and have substantial impact on Europe. Additionally, the U.S. is one week away from imposing a new round of tariffs on Chinese goods (on December 15th). Stocks opened this week on a down note, focused on those trade issues, after a drop in China’s exports held stocks back. The -0.4% slide in Monday trade was followed up by a quiet -0.1% slip Tuesday. Wednesday brought the first of a flurry of news days with the outcome of the Fed meeting reaffirming their intent to keep interest rates flat for the foreseeable future, while also offering an upbeat economic outlook. Wednesday also delivered the largest ever stock listing, that of Saudi national oil company, Aramco. Optimism over an imminent trade deal sent stocks rumbling higher Thursday. The first European Central Bank meeting directed by new ECB Chair Christine Lagarde also provided optimism. Stocks closed +0.9% to print records on the S&P 500 and Nasdaq. The positive tone carried over into Friday trade as the U.S.-China “Phase One” deal looked to be done. Furthering the cheer was a decisive victory in the UK election for Boris Johnson, a stout fan of the UK leaving the European Union. These events clear up two of the clouds hanging over investors for much of the year. With the Fed holding interest rates firm, the U.S.-China deal having reached at least a partial conclusion, and the situation in Europe clearer, investors seemed very willing to extend their risk this week. Stocks closed flat on the day in the U.S. However, international markets closed solidly higher on the week, emboldened by the news.
In a week that could have proved pivotal for the recent rally, stocks added another positive week to the books. The S&P 500 (SPY) rose +0.78% while the Nasdaq 100 (QQQ) gained +1.07%. Small-cap stocks (IWM) held their recent breakout with a +0.31% lift.
Warm wishes and until next week.