Stocks reached new highs again last week and continue to benefit from easy monetary conditions provided by central banks that have significant leeway due to low inflation.

Reduced U.S.-China trade tension is also raising optimism.

Dow Jones0.723.013.4
S&P 5001.027.617.1
MSCI EAFE0.518.912.5
MSCI Emerging Markets-0.810.57.3
10-year U.S. Treasury1.782.722.41
30-year U.S. Treasury2.213.022.74

Source: Janney ISG, Bloomberg. Data as of 11/29/19.

Encouragingly, global manufacturing conditions, which have been at the center of the global slowdown, are showing signs of improvement. China typically leads the manufacturing cycle and their manufacturing readings continue to show improvement. This signals that China’s significant economic stimulus is gaining traction. We anticipate further improvement in global manufacturing conditions as we move into 2020. Meanwhile, the U.S. consumer, which has been the driving factor for the economic expansion, remains healthy and confident. These factors bode well for the economy and risk assets as we move toward 2020.

U.S. Economic Data Remains Consistent with Further Growth

The major U.S. economic news last week came from consumer confidence and spending, durable goods orders, and a revised look at third quarter economic growth. The story remains one of slower, but still positive economic growth.

The Conference Board’s Consumer Confidence Index ticked down and is off its cycle high, but remains elevated compared to history, which suggests that consumer spending will continue to support the ongoing economic expansion. While personal income was flat in October, spending was up 0.3% with the personal savings rate at a healthy 7.8%. These positive consumer indicators remain consistent with continued moderate economic growth.

Durable goods orders rebounded 0.6% in October and, importantly, nondefense capital goods orders ex-aircraft (core business orders) rose 1.2%—the most since January. This is an early sign of a capital expenditure revival and consistent with recent business surveys.

Third quarter economic growth was revised up to a 2.1% annual rate, which is notably slower than the peak 3.2% rate in the second quarter of 2018. This moderation reflects a number of factors, including the global slowdown, trade tensions, and the wearing off of the 2018 tax cut stimulus. This is also consistent with our outlook for slower, but still positive, economic growth as we moved thru 2019 and toward 2020.

Initial claims for unemployment insurance dropped 15,000 last week to 213,000. This is an encouraging sign from this timely and accurate economic indicator that continues to show a healthy labor market. This bodes well for consumer confidence and spending as we head into the holiday shopping season.

Business Surveys Show Improving Global Manufacturing Conditions

The J.P.Morgan Global Manufacturing PMI—a timely business survey—posted a seven-month high of 50.3 in November, moving back above the 50.0 line dividing expansion from contraction for the first time since April. While this level of the PMI is consistent with only a slight improvement in overall operating performance, we expect further improvement as we head into 2020.

Eleven of the nations for which November PMI data were available registered expansions, with the strongest growth signaled for Greece, Colombia and Brazil. The U.S., China and France were also among the nations seeing an improvement. Germany and the Czech Republic remained at the bottom of the growth rankings.

This report is provided for informational purposes only and shall in no event be construed as an offer to sell or a solicitation of an offer to buy any securities. The information described herein is taken from sources which we believe to be reliable, but the accuracy and completeness of such information is not guaranteed by us. The opinions expressed herein may be given only such weight as opinions warrant. This Firm, its officers, directors, employees, or members of their families may have positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or otherwise and may sell to or buy from customers such securities on a principal basis. Past performance is not necessarily a guide to future performance.



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