The signing of the Phase One trade deal between the US and China catapulted US Equity Markets higher last week, once again leading to all-time highs. The S&P 500 rallied 2.0% for the week and is already up a healthy 3.1% for the year.The Nasdaq rose another 2.3% for the week, bringing its gains for the year to 4.6%, while the Russell 2000 (small-cap stocks) increased 2.5% for the week to move it into positive territory for the year, up 1.9%.
Global equity markets rallied as well last week on the trade deal and Chinese reports that its economic growth rose 6.1% in 2019. Developed Markets were up 0.9% for the week and are now up 1.1% for the year. Emerging Markets rose 1.2% for the week to bring its gains for the year to 2.9%.
Corporate earnings for the fourth quarter began last week, and reports have generally come in better than expected. While it is early with only about 9% of companies reporting thus far, 72% of firms have beaten earnings expectations and 63% have beaten sales forecasts, both higher than historical norms.
Of Interest to Us
The top 5 stocks in the S&P 500 (Apple, Microsoft, Amazon, Google, Facebook) today account for about 18% of the market capitalization of the entire S&P 500, a historical high that is even larger than prior to the tech bubble in 2000. On the surface, that statistic appears to be alarming. However, the valuations today of the top 5 stocks, as represented by projected earnings per share, are about 50% lower than they were back in 2000.
for the week ending 1/17/2020
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