U.S. STOCKS REACH FRESH HIGHS AS GDP IS REVISED UP AND THE 2019 HOLIDAY SHOPPING SEASON COULD SET NEW RECORDS
- The four major U.S. stock market averages closed the Thanksgiving week with green numbers that gave investors reasons to give thanks
- The DJIA, S&P 500, and NASDAQ all reached new record highs and even the small–cap Russell 2000 moved to its best level in over a year
- The DJIA crested that 28,000–point barrier again after its 0.6% weekly gain, but the S&P 500 almost doubled that with a 1.0% weekly gain
- NASDAQ, on the other hand, outdid them all with a weekly jump of 1.7%, which puts its YTD numbers north of 30% with a month left on the calendar
- Nothing major transpired on the holiday–shortened week, except for more headlines suggesting a Phase One trade agreement between the U.S. and China might be reached soon
- Wall Street held its collective breath mid–week when President Trump signed the Hong Kong Human Rights and Democracy Act, expecting an angry response from China, but nothing really materialized
- Ten of the 11 S&P 500 sectors ended the week green and half of them gained more than 1% on the week
- Consumer Discretionary led the sectors, moving up 1.8% and the Energy sector once again was red, losing 1.6%
- The U.S. Treasury market was quiet as the 10–year Treasury yield barely moved on the week
Weekly Market Performance
Markets Set New Records Through Thanksgiving 2019
Through the end of Thanksgiving week, the performance of U.S. equity markets has been nothing short of fantastic. In fact, the major U.S. equity markets have reached new highs, spurred on by 50–year low unemployment numbers, an accommodative Federal Reserve, a good 3Q earnings season, rising wages and healthy GDP numbers.
In fact, the second reading of third–quarter’s annualized growth in Gross Domestic Product was revised up this week from 1.9% to 2.1%.
But investors are thankful for the performance of the major U.S. market indices through the end of November this year, as:
- The DJIA is up 20.3% YTD
- The S&P 500 is up 25.3% YTD
- NASDAQ is up 30.6% YTD
- The Russell 2000 is up 20.5% YTD
The fact is that U.S. stocks are having their best year in more than half a decade and bonds are doing even better, as they are up the most they’ve been in almost 17 years.
Investors are now turning to the all–important U.S. consumer, as Thanksgiving marks the beginning of the holiday shopping season and 2019 is predicted to be the best on record.
2019 Online Holiday Shopping Could be Huge
According to Adobe, online holiday shopping (November through December) revenue in the U.S. is projected to be $140 billion in 2019, representing 14% more than online holiday spending in 2018. And this is despite there being 6 fewer shopping days this year.
Further, Adobe predicts that:
- Retailers will be starting sales early, due to the shortened holiday season
- Cyber Monday will set a new record with $9.4 billion
- Cyber Week will account for 20% of total holiday season revenue
Phase One Deal with China Soon?
Early in the week, stocks jumped on news that China intended to develop new rules protecting against the theft of intellectual property, which has been a demand from President Trump from the beginning of this trade saga.
While the details are a long way out, purportedly China is planning to expand the legal definition of what Intellectual Property Theft is as well as create harsher penalties for those engaging in IP theft.
Later in the week President Trump signed a bill supporting human rights in Hong Kong and investors were worried that it would once again derail China negotiations, but Trump was careful in his wording and the response from China was muted.
Positive Housing Signs
While the week saw market volume spike considerably, possibly as a result of the holiday-shortened trading days, investors also digested some encouraging macro–data with respect to the housing market.
According to the U.S Census Bureau and the Department of Housing and Urban Development:
- Sales of new single–family houses in October 2019 were at a seasonally adjusted annual rate of 733,000
- This is below the revised September rate of 738,000 but is above the October 2018 estimate of 557,000
- The median sales price of new houses sold in October 2019 was $316,700
- The average sales price was $383,300
- The seasonally–adjusted estimate of new houses for sale at the end of October was 322,000. This represents a supply of 5.3 months at the current sales rate
Investors Worried About the Rest of the Year?
Investors are trying to forget that through Thanksgiving week last year, the S&P 500 went negative, led by the FAANG group which officially entered bear market territory after dropping more than 20% from their 52–week highs. And they are especially trying to forget that shortly after Thanksgiving last year, the S&P 500 kept posting red numbers on its way to a –9.18% return for the month of December 2018.
Instead, glass–more–than–half–full investors are choosing to remember that the stock market has historically done well after Thanksgiving. Since 1950, the average return in December has been 1.5%, with the market logging a post–holiday gain in 81% of those years.