Global valuation check-in. Developed international equities have gotten relatively cheaper following recent underperformance compared with the U.S. and Emerging Markets (EM). On a forward price-to-earnings basis, the MSCI EAFE Index is trading at an 18% discount to the S&P 500 Index, about 10% below the 20-year avg. EM is cheaper, with the MSCI EM Index trading at a 27% discount to the S&P 500, but that level is in line with the 20-year avg. We prefer EM fundamentally to EAFE, particularly Europe; and EAFE valuations are being overwhelmed by a very cheap Japanese market. However, the valuation support is notable for strategic investors with sizable European equity allocations as we continue to look for green shoots across the pond.
U.K. finds more roads to nowhere. Alternatives to Theresa May’s Brexit deal were rejected, despite her efforts to sway lawmakers by offering to quit if they backed her deal. A customs union and another public vote received the most support. A deal or another delay are the most likely outcomes on or before the April 12 deadline.
Final Q4 GDP lowered. Final estimates for U.S. economic growth were revised down 0.4% to an annualized 2.2% after downward revisions to personal consumption expenditures, state and local government spending, and nonresidential fixed investment. An adjustment to import totals helped. First quarter 2019 is expected to show a continued deceleration in growth; however, a dip in Q1 is consistent with previous readings in this cycle, employment and wage growth are near cycle highs, and some temporary headwinds are expected to clear, setting up for a pickup in growth in Q2.
The real bull market anniversary? Six years ago today the S&P 500 finally closed above its peak set in October 2007. This begs the question: Did the true bull market start on this day in 2013 and not in 2009? It is common to say that this bull market is 10 years old, if you start in March 2009 it is. But some market historians would prefer to start the bull clock when new highs are made. So maybe the bull isn’t as old as many think? Of course, there is no true answer and the bottom line is this has been a historic run no matter how you slice it.
Talking yield curves. The short end of the yield curve inverted last Friday and the media have been all over it, as the past nine recessions all were proceeded by an inverted curve. There is much more to this story though: like it can take years for a recession to take place after an inversion, not all inversions have led to a recession, the long end of the curve is actually steepening, and global yields are significantly lower than at any other time in history. All of these things (and more) add to the discussion. Today on the LPL Research blog we take a much closer look at this potentially worrisome signal.
- GDP Report (Third Revision, QoQ Q4 2018)
- Initial Jobless Claims (March 23)
- Pending Home Sales (MoM, Feb)
- Eurozone Economic Confidence Index (Mar)
- Germany CPI Report (Mar)
- Japan Jobless Rate (Feb)
- Japan Tokyo CPI Report (Mar)
- Japan Industrial Production (Preliminary Feb)
- Japan Retail Sales (Preliminary Feb)
- Core PCE (MoM Jan)
- New Home Sales (MoM Feb)
- University of Michigan Sentiment Index (Mar)
- Germany Unemployment Claims Rate (Mar)
- UK GDP Report (Q4 2018)
- Eurozone CPI Report (Mar)
- Canada GDP Report (Jan)
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