Week in Review: Returns of the Decade

Stocks rose in the final week of 2019, with several major indexes hitting fresh record highs. Trade optimism helped stocks move on to new highs in a week of quiet trading surrounding the Christmas holiday. The technology-heavy Nasdaq Composite Index outperformed and crossed the symbolic 9,000 mark for the first time.

President Donald Trump told reporters this week that he and Chinese President Xi Jinping would soon meet and that “the deal is done” and is “just being translated right now.” The details of the agreement have yet to be released, however, and Chinese officials have indicated that they will not be until after the official signing ceremony.

Optimism around the trade deal propelled many emerging markets higher in a week of light trading. The MSCI Emerging Markets Index rose slightly, gaining 0.4% and trading near its highest levels since 2018. South Africa’s rand jumped to a fresh five-month high against the U.S. dollar as investors seemed to resume risk-taking, and the Russian ruble was on track for an 11% gain against the U.S. dollar for the year.

Italy’s parliament passed its 2020 budget, a week ahead of the year-end deadline. Italy’s governing coalition cancelled a sales tax hike amid concerns about weak household spending and kept the fiscal deficit target at 2.2% of gross domestic product.

For the week, global equities were stronger. In the U.S., the Dow Jones (+0.67%), S&P 500 (+0.58%) and Nasdaq (+0.91%) were all positive, whilst in Europe the Euro Stoxx 50 (+0.15%) and FTSE 100 (+0.82%) continued to advance. In Asia, the Nikkei 225 (+0.09%) and Shanghai Composite edged slightly higher for the week.

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Market Moves of the Week

The JSE ended in positive territory for a second day this week on Friday, pushed higher by the mining index, as gold steadied after rising to its highest in nearly two months.

The rand closed at R14.03 translating to its strongest performance in four months. The strength in the rand has been driven by improved emerging market sentiment on the back off an imminent signing of a phase one trade deal between the U.S. and China and the global search for yield. The attractive yield the rand offers compared to its emerging market peers has led to increased carry trade inflows (a strategy whereby a high-yielding currency funds the trade with a low-yielding currency, attempting to capture the difference between the rates, which can often be substantial).

The JSE All Share Index ended the week slightly firmer (+0.03%), with industrials (-0.43%) and financials (-0.19%) softer and resources (+0.78%) stronger.

Weekly
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Chart of the Week

American stocks trounced developed-market competitors. Adjusted for volatility risk, gains in the S&P 500 index since Dec. 31, 2009 look poised to be the highest of any decade since at least the 1950s. The U.S. dollar’s status as the world’s premier reserve currency looks as strong as ever, defying post-crisis fears that the centre of monetary gravity would shift from America to China. The greenback accounts for some 60% of global foreign exchange reserves.

Returns of the Decade

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