 | AUTHOR: Jason J. Roque, CFP®, APMA® TITLE: Investment Adviser Rep – CCO TAGS: Jobs, Manufacturing, Corona Virus |
Markets surged last week, with the S&P 500 having its best week of the year. Were there any red flags though?
US Data
Markets had many things to celebrate last week. Earnings throughout the week continued to impress for the 4th quarter. Unemployment rose to 3.6%, but that was a positive as more people rejoined the workforce on optimism on job conditions. The participation rate increased from 63.2% to 63.4%. This likely represented people reengaging their job searches after the holidays. Possibly the most exciting news was that ISM Manufacturing PMI rose more in January than expected. It jumped from 47.8 to 50.9–not only did it increase, it made its way back into expansion territory. 50 marks the line of contraction and expansion.
EU Data
The European Union (EU) markets grew last week as well, however, it appeared to be due to international circumstances. Data out of the EU was not as favorable as the US. Industrial production fell hard late in the year for both Germany and France as well as manufacturing continuing to struggle.
Corona Virus
Early in the week there was some optimism that the spread of the Corona Virus had slowed. That optimism faded as the week wore on and the infection and mortality rate both mounted. The mortality count has now surpassed that of SARS. The rate of people who have recovered from the virus is approximately 7.5% with a mortality rate of about 2%. The quarantine happening around the world, specifically China, will have a substantial impact to global GDP during 2020. Markets responded to this risk on Friday, selling off after a strong first four trading days to the week.
Conclusion
Strong data is exciting, but somewhat expected in 2020 as a global economic recovery was expected for the year. Earnings beating expectations from the 4th quarter were surprising and surely welcome. The issue is that as long as the Corona Virus goes uncontained, positive data will be held in check.
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