Commentary

Fisher Investments Editorial Staff
Monetary Policy

The Fed’s Slimdown Is No SlimFast

By, 09/20/2017
Ratings64.833333

This person’s diet plan was faster than the Fed’s—and likely more impactful for stocks. Photo by Champja/iStock.

Well there you have it. In among the least-surprising central bank moves of all time, the Fed just announced it will begin unwinding quantitative easing (QE) next month, using the plan previewed in June. Unless you zoom in to about 1000x normal on a chart of the S&P 500, markets took the news in stride, which seems right to us. Not only was there zippo surprise power, but this is about the most gradual unwinding imaginable. This isn’t Marriner Eccles jacking up reserve requirements in 1937 or Alan Greenspan inverting the yield curve in 2000. It is perhaps the slowest, most boring not-really-tightening of monetary policy in Federal Reserve history.

Research Analysis

Charles Dornbush and Timothy Schluter
Monetary Policy

The Curious Case of Japan’s Stealth QE Taper

By, 09/20/2017

In the last year, the BoJ has been most notable for its quiet. Publicly, the bank hasn’t shifted policy at all from its large-scale asset purchases. No surprise expansions or new assets targeted. No forceful forward guidance. No new letters. Nevertheless the BoJ’s asset purchases slowed noticeably over the past 12 months—a “stealth taper,” if you will. Meanwhile, loan growth ticked higher, just as it did in America and Britain when the Fed and BoE tapered quantitative easing (QE). Whether intentionally or unintentionally, it seems to us the BoJ may have stumbled onto more sensible monetary policy.

The BoJ and Governor Haruhiko Kuroda have arguably been the leading proponents of long-term asset purchases—quantitative easing. They added a second “Q” (quantitative and qualitative easing) back in 2013, aimed at rapidly building up the monetary base with an aim to reach a 2% annual inflation growth rate. They also cut short-term interest rates into negative territory in 2016, in another misguided attempt to stoke inflation. At its peak, the BoJ bought ¥80 trillion in Japanese government bonds (JGBs), ¥6 trillion in ETFs and ¥90 billion in REITs, annually. These efforts have largely fallen short of their goal.

In September 2016, the BoJ changed course yet again and added three more letters to its monetary alphabet soup: YCC, or yield-curve control. The BoJ expressly targeted a 10-year JGB yield of 0%—at the time, up from -0.1%. This was intended to ease the pain on bank profitability brought by negative rates and the flat yield curve BoJ asset purchases wrought. Accomplishing this allowed JGB purchases to fluctuate. Over the past 12 months ending in August 2017, the BoJ purchased just ¥65 trillion in JGBs—a marked slowdown from the past couple years. For comparison’s sake, over the same timeframe ending in August 2016, the BoJ bought ¥81 trillion in JGBs.

Commentary

Fisher Investments Editorial Staff
Currencies

Weak Theories About the Weak Dollar

By, 09/19/2017
Ratings64.583333


Pound for pound, currency theories punch below their weight. (Photo by SrdicPhoto/iStock by Getty Images.)

Surprise! Eight-plus months into 2017, the dollar is among the weakest currencies globally. After rallying last year—and the vast majority of the time since 2013—the dollar, on a trade-weighted basis, is down -8.2% through September 15.[i] Predictably, pundits who fixated on the strong dollar before now assume the “weak” dollar is the be-all, end-all markets story. Some presume the weakness is a prelude to a stock decline. Others argue it is sure to goose certain sectors and assets. And sure, there is some influence. But put into proper perspective, currency gyrations just don’t mean as much as investors often presume.

Theories abound over currency effects, but most are half baked. If strong-dollar bears are consistent,[ii] a weak dollar should be bullish. The argument is large US multinationals—much of the US market by capitalization—benefit because their foreign sales (in foreign currencies) translate into greater revenue and profits when converted back into dollars. More earnings = good, right? But this is too simplistic. Among other complications, multinationals typically hedge foreign exchange exposure. Good management is well aware currencies fluctuate. Occasional references to exchange rate impacts at earnings releases are most often excuses,[iii] in our view. But what’s more, multinationals’ supply chains often extend globally. A weak dollar also means rising import costs crimping margins (when insufficiently hedged).

Commentary

Fisher Investments Editorial Staff

Surveys Show Warmer—But Still Mixed—Sentiment

By, 09/19/2017
Ratings234.934783

Are you feeling happy these days? You aren’t alone. As markets clock new highs, some widely watched investor sentiment surveys report widespread cheer—with one showing investors at their sunniest since September 2000. Yet before you fear euphoria has set in, another survey shows fund managers feeling a bit more blue. What to do? Looking at all the surveys and putting them in historical context, it seems fair to say investors are broadly more optimistic—as you’d expect in a maturing bull market. But pockets of skepticism indicate investors haven’t run out of worries, suggesting to us folks can get even happier before sentiment spirals out of control.

Here is a more detailed look at the surveys in question. First up, the weekly American Association of Individual Investors (AAII) survey, which reports 41.3% of investors were bullish, 36.7% were neutral and 22.0% were bearish as of September 13—above the historical average of 38.5% bullish since July 1987.

Meanwhile, the Wells Fargo/Gallup Investor and Retirement Optimism Index for August hit a 17-year high. The 98-point rise in since February 2016 is the highest rise in the index’s 20-year history. Moreover, 68% say they are “optimistic” about the market over the next year—matching the record high from December 1999/January 2000—and 25% say they are “very optimistic,” a record high. Yet institutional investors seem more skeptical, according to the September Bank of America Merrill Lynch Fund Manager Survey. The number of managers hedging against a possible correction posted its biggest jump in 14 months, and they’re holding a “higher than average level of cash.” So while individual investors may be turning more bullish, institutional investors seem to be becoming more bearish. That raises the question: Whom should we believe?

Commentary

Christopher Wong
Into Perspective

Chart of the Day: When Real Estate Decided to Go Solo

By, 09/18/2017
Ratings183.416667

One year ago, the smart people at MSCI and S&P who determine the Global Industry Classification Standard (GICS) declared Real Estate the 11th sector[i]—the first change to the prominent sector list since 2001. The GICS folks had pondered breaking Real Estate out of Financials since 2014, and with the growing popularity of Real Estate Investment Trusts (REITs) in recent years, it seemed like a logical decision. A month after its debut, however, Real Estate trailed both its former Financials home and the broader S&P 500 index. A year later? That lag is even more pronounced. In my view, this serves as a friendly reminder to tread cautiously when considering trendy or headline-making investment opportunities—it smacks of chasing heat, a dangerous investing approach.   

Here is a chart showing Real Estate’s relative performance compared to Financials and the broader S&P 500. When the lines are rising, Real Estate is outperforming.

Exhibit 1: Real Estate’s Relative Performance

Commentary

Todd Bliman
Monetary Policy

Minding the Fed’s (Possible) Unwinding

By, 09/14/2017
Ratings474.308511

Many suspect the Fed will try make the numbers on its balance sheet smaller starting next week. Photo by Absolut_100/iStock.

Next Tuesday and Wednesday, the fun bunch at the US Federal Open Market Committee (FOMC, the Fed’s monetary policy-making folks) will get together and discuss monetary policy.[i] There is talk of rate hikes, but after Fed head Janet Yellen alluded to it in recent meetings, most speculation centers on whether or not the Fed will begin unwinding the bond purchases made under its earlier quantitative easing program (QE). “Balance sheet reduction,” in central bank-speak. Many presume this spells big trouble—higher interest rates! Less Fed “support” for stocks! However, in my view, a look at recent history and the Fed’s plan shows these fears are likely quite overdone. Beyond a possible short-term wiggle, the Fed’s reducing the size of its balance sheet doesn’t seem likely to materially impact stocks.

Commentary

Elisabeth Dellinger
Inflation, Monetary Policy

Fun With Uncle Milty

By, 09/14/2017
Ratings964.317708

Will the Phillips Curve’s fecklessness ever dawn on the Fed? Photo by Elisabeth Dellinger, who asks you to pardon the lens flair.

Dude, where’s my inflation? Fed people are perplexed, unable to fathom how inflation could stay low even though the economy is at what many deem full employment. According to Fed Logic, because companies must compete for a limited pool of workers when unemployment is low, they have to raise wages—and raise prices to offset the extra expense—and thus inflation happens. The central bank’s dual mandate is based on this model. Yet, this isn’t how inflation works. It isn’t a labor market phenomenon. Nor is it a psychological phenomenon, which guts a frequent explanation for The Case of the Missing Inflation. As Nobel-laureate Milton Friedman and many others have shown over the last century-plus, it is a monetary phenomenon: too much money chasing too few goods and services. The budding Nancy Drews and Hardy Boys at 20th and Constitution don’t need fancy models, complex theory or cipher keys to crack the case. Brushing up on Uncle Milty’s greatest hits would do it. But even if they never see the light, investors can learn from their confusion.

Commentary

Fisher Investments Editorial Staff
Media Hype/Myths

Calendars Help Track Time, Not Time Stocks

By, 09/14/2017
Ratings404.4125


This shouldn't guide your investment choices. Photo by in-future/iStock by Getty Images.

Every year, pundits trot out the fable September is the “Worst Month for Stocks”™ and October another minefield. Packaged with current fears like North Korea, central bank decisions and Brexit, fall’s onset looks scary—leading some to think it’s prudent to take a breather from stocks. However, in our view, there is nothing special for markets about September and October—and presuming otherwise could prove damaging for investors.

Those touting these months’ perils point to their subpar average returns: Since 1925, the S&P 500 has averaged -0.9% in September (in price returns). The Global Financial Data World Ex-US Index’s monthly average (also price returns) was better but still negative (-0.5%).[i] For both indexes, September is the only month with a negative average return.

This may be so—but the S&P 500 has risen in 45.7% of Septembers, compared to a 59.1% positive frequency for all months. (Exhibit 1) September isn’t leading the pack, but it’s far from a guaranteed negative—and we don’t see the logic in skipping a month that’s positive almost half the time.

Commentary

Christopher Wong
Into Perspective, Reality Check, Unconventional Wisdom

All the News That’s Fit for Markets

By, 09/08/2017
Ratings574.412281


Which headlines make stocks move? Photo by scanrail/iStock by Getty Images. 

Have you ever wondered what news stocks care about?[i] Some seem obvious, like announcements on an earnings call or new legislation aimed at a certain sector (e.g., banking regulations). But a lot of important stuff seems lost on stocks. Like climate change. Income inequality. The opioid crisis. These issues affect many lives and garner significant real estate in the papers—why don’t they seem to affect stocks? Because these issues fall in the realm of “sociology,” and sociology doesn’t fundamentally alter stocks’ price drivers: supply and demand. 

First, a definition[ii]: When I say sociology, I’m referring to issues that impact our social, political, environmental and other societal relationships. They relate to the economy in some ways, but they aren’t expressly economic matters or drivers—though many public figures argue otherwise. (A fancy term for this is socioeconomics, but that’s jargon-y.) Though important, sociology doesn’t meaningfully affect stock supply or demand. Or, more specifically, it doesn’t affect corporate earnings—a key demand driver—in the next 3 – 30 months, which is the timeframe most relevant to markets. Beyond that, too many variables are unknown.

Commentary

Fisher Investments Editorial Staff
Commodities, Taxes

Got Gold? Bitcoin? Tax Considerations for Nontraditional Investments

By, 09/06/2017
Ratings483.739583

What follows is intended to be an informational discussion of tax basics and not personalized advice. Please consult your tax advisor if you are curious about implications in your specific case.

Bitcoin—the cryptocurrency conjuring a nearly endless stream of headlines—recently underwent a widely publicized spinoff. In an effort to increase liquidity, software developers mirrored original bitcoin’s code and handed everyone who owned one bitcoin one new Bitcoin Cash.[i] Opinions of the transaction’s merits run the gamut, but there is one opinion we think you should particularly mind: the US Internal Revenue Service’s. You see, there is confusion over how this 1-for-1 spinoff will be treated for tax reasons. Does the receipt of Bitcoin Cash count as taxable income in 2017? Or will it be treated like most equity spinoffs, with taxation deferred until sale? To this point, the IRS has been mum—leaving Bitcoin Cash owners in tax limbo. Of course, the impact here is narrow—cryptocurrencies aren’t common. But we think there is a lesson here for investors in unorthodox investments of all kinds: Get informed about potential tax implications before buying. To that end, here is an informational guide to some tax considerations for off-the-beaten-path investment products.

First, though, let’s review how taxation typically works for investors in stocks outside of retirement accounts. Gains—the difference between what you paid for the stock (your cost basis) and the sale proceeds—are subject to capital gains rates. How long you owned the asset is key. If you sell a security within a year of buying it, short-term capital gains rates apply—and these match your ordinary federal income tax rate. Gains on securities held longer than a year qualify for typically lower long-term capital gains rates—usually 15% but sometimes 20%. (An additional surtax on net-investment income associated with the Affordable Care Act can boost these a bit more.) Dividend taxation hinges on whether they are “qualified” or not. Qualified dividends (which are taxed at capital gains rates) must be issued by US-based or US-listed firms and held for at least 60 days.[ii] Everything else is unqualified and taxed as income. Those are the basics. But if you veer into unconventional assets, there is much more.

Commentary

Elisabeth Dellinger
Inflation, Monetary Policy

Fun With Uncle Milty

By, 09/14/2017
Ratings964.317708

Will the Phillips Curve’s fecklessness ever dawn on the Fed? Photo by Elisabeth Dellinger, who asks you to pardon the lens flair.

Dude, where’s my inflation? Fed people are perplexed, unable to fathom how inflation could stay low even though the economy is at what many deem full employment. According to Fed Logic, because companies must compete for a limited pool of workers when unemployment is low, they have to raise wages—and raise prices to offset the extra expense—and thus inflation happens. The central bank’s dual mandate is based on this model. Yet, this isn’t how inflation works. It isn’t a labor market phenomenon. Nor is it a psychological phenomenon, which guts a frequent explanation for The Case of the Missing Inflation. As Nobel-laureate Milton Friedman and many others have shown over the last century-plus, it is a monetary phenomenon: too much money chasing too few goods and services. The budding Nancy Drews and Hardy Boys at 20th and Constitution don’t need fancy models, complex theory or cipher keys to crack the case. Brushing up on Uncle Milty’s greatest hits would do it. But even if they never see the light, investors can learn from their confusion.

Commentary

Fisher Investments Editorial Staff
Media Hype/Myths

Calendars Help Track Time, Not Time Stocks

By, 09/14/2017
Ratings404.4125


This shouldn't guide your investment choices. Photo by in-future/iStock by Getty Images.

Every year, pundits trot out the fable September is the “Worst Month for Stocks”™ and October another minefield. Packaged with current fears like North Korea, central bank decisions and Brexit, fall’s onset looks scary—leading some to think it’s prudent to take a breather from stocks. However, in our view, there is nothing special for markets about September and October—and presuming otherwise could prove damaging for investors.

Those touting these months’ perils point to their subpar average returns: Since 1925, the S&P 500 has averaged -0.9% in September (in price returns). The Global Financial Data World Ex-US Index’s monthly average (also price returns) was better but still negative (-0.5%).[i] For both indexes, September is the only month with a negative average return.

This may be so—but the S&P 500 has risen in 45.7% of Septembers, compared to a 59.1% positive frequency for all months. (Exhibit 1) September isn’t leading the pack, but it’s far from a guaranteed negative—and we don’t see the logic in skipping a month that’s positive almost half the time.

Commentary

Christopher Wong
Into Perspective, Reality Check, Unconventional Wisdom

All the News That’s Fit for Markets

By, 09/08/2017
Ratings574.412281


Which headlines make stocks move? Photo by scanrail/iStock by Getty Images. 

Have you ever wondered what news stocks care about?[i] Some seem obvious, like announcements on an earnings call or new legislation aimed at a certain sector (e.g., banking regulations). But a lot of important stuff seems lost on stocks. Like climate change. Income inequality. The opioid crisis. These issues affect many lives and garner significant real estate in the papers—why don’t they seem to affect stocks? Because these issues fall in the realm of “sociology,” and sociology doesn’t fundamentally alter stocks’ price drivers: supply and demand. 

First, a definition[ii]: When I say sociology, I’m referring to issues that impact our social, political, environmental and other societal relationships. They relate to the economy in some ways, but they aren’t expressly economic matters or drivers—though many public figures argue otherwise. (A fancy term for this is socioeconomics, but that’s jargon-y.) Though important, sociology doesn’t meaningfully affect stock supply or demand. Or, more specifically, it doesn’t affect corporate earnings—a key demand driver—in the next 3 – 30 months, which is the timeframe most relevant to markets. Beyond that, too many variables are unknown.

Commentary

Fisher Investments Editorial Staff
Commodities, Taxes

Got Gold? Bitcoin? Tax Considerations for Nontraditional Investments

By, 09/06/2017
Ratings483.739583

What follows is intended to be an informational discussion of tax basics and not personalized advice. Please consult your tax advisor if you are curious about implications in your specific case.

Bitcoin—the cryptocurrency conjuring a nearly endless stream of headlines—recently underwent a widely publicized spinoff. In an effort to increase liquidity, software developers mirrored original bitcoin’s code and handed everyone who owned one bitcoin one new Bitcoin Cash.[i] Opinions of the transaction’s merits run the gamut, but there is one opinion we think you should particularly mind: the US Internal Revenue Service’s. You see, there is confusion over how this 1-for-1 spinoff will be treated for tax reasons. Does the receipt of Bitcoin Cash count as taxable income in 2017? Or will it be treated like most equity spinoffs, with taxation deferred until sale? To this point, the IRS has been mum—leaving Bitcoin Cash owners in tax limbo. Of course, the impact here is narrow—cryptocurrencies aren’t common. But we think there is a lesson here for investors in unorthodox investments of all kinds: Get informed about potential tax implications before buying. To that end, here is an informational guide to some tax considerations for off-the-beaten-path investment products.

First, though, let’s review how taxation typically works for investors in stocks outside of retirement accounts. Gains—the difference between what you paid for the stock (your cost basis) and the sale proceeds—are subject to capital gains rates. How long you owned the asset is key. If you sell a security within a year of buying it, short-term capital gains rates apply—and these match your ordinary federal income tax rate. Gains on securities held longer than a year qualify for typically lower long-term capital gains rates—usually 15% but sometimes 20%. (An additional surtax on net-investment income associated with the Affordable Care Act can boost these a bit more.) Dividend taxation hinges on whether they are “qualified” or not. Qualified dividends (which are taxed at capital gains rates) must be issued by US-based or US-listed firms and held for at least 60 days.[ii] Everything else is unqualified and taxed as income. Those are the basics. But if you veer into unconventional assets, there is much more.

Commentary

Fisher Investments Editorial Staff
Across the Atlantic, GDP

UK OK

By, 09/01/2017
Ratings304.216667

A month after the UK Office for National Statistics (ONS) released its preliminary Q2 GDP estimate—up a ho-hum 0.3% q/q—their second estimate, released last week, stayed the same. We grant you, not very exciting. But to jazz it up, the media provided some context: The G7’s laggard! First half growth worst in five years! No contributions from trade or investment! This would have you believe Brexit, the pound’s fall, rising inflation—take your pick—is finally biting the UK economy. However, we believe reality is better than sentiment supposes—a low bar for the economy to clear and boost stocks.

Lost in the doom mongering: Q2’s 0.3% q/q (1.2% annualized) growth accelerated from Q1’s 0.2% (0.9% annualized).[i] (Exhibit 1) Yes, it’s tiny and just one quarter, but it illustrates the sentiment disconnect. Pessimists bemoan the UK’s two consecutive lackluster quarters—a big slowdown from last year—to wring maximum gloom. Q1 growth did slow substantially from Q4’s 0.7%. But that happened from Q4 2015 to Q1 2016, too. Pre-Brexit! This may just be normal data variability, not a Brexit-induced recession developing.

Exhibit 1: UK GDP Fluctuates

Commentary

Fisher Investments Editorial Staff
Into Perspective

Need Bonds? Here Is What to Weigh Next

By, 08/31/2017
Ratings904.066667

Need bonds? Then, like equity investors, you face a choice: Should you use individual bonds or bond funds (including ETFs)? Too often, it seems investors automatically resort to the former, presuming individual bonds are superior to bond funds because you can hold them to maturity and get your original investment back.[i] But in reality, bonds and bond funds each have pros—and cons—to consider. Applying the fallacious principle that individual bonds are better in all situations can expose your principal to more risk than you may appreciate.

Understanding how individual bonds and bond funds trade is helpful when deciding which option is best for your situation. Individual bonds trade “over the counter” (OTC), either through a dealer network where buyers and sellers trade through electronic trading systems or (get this!) by telephone. Dealers make markets in bonds, quoting prices at which they would like to buy and sell. Because they are decentralized—unlike stock exchanges—dealer networks are less efficient. For example, various dealers could quote different prices for the same bond. There are an overwhelming number of bonds on the market. While many publicly traded companies have one or two types of stock (common or preferred; perhaps voting and non-voting), a single company typically has many different bonds.

Each new issue is unique from the same company’s previously issued bonds. Take Exxon for example—currently there are 19 different Exxon bonds available.[ii] Though they are all Exxon bonds, different covenants (terms in the agreements), maturities, call options and other factors can make analysis daunting. Conversely, bond funds—especially ETFs—are easier to trade. Many target specific factors you can use to build your fixed income exposure according to the general criteria you want.

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

Market Insights Podcast: Energy Sector - June 2017

By, 06/13/2017
Ratings323.5625

In this podcast, Communications Group Manager Naj Srinivas talks to Research Analysts Luis Casian and Brad Rotolo about the Energy sector’s recent developments and our current outlook.

00:56 - Major Energy stories
01:48 - OPEC vs. US production
03:50 - What could cause oil to venture out of its recent norm near $50?
05:30 - Recent globalized nature of oil production
07:03 - Technological improvements in fracking
09:15 - Natural gas byproducts
10:13 - US production meets demand

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

Market Insights Podcast: Market Update - May 2017

By, 05/15/2017
Ratings623.830645

In this podcast, we talk to US Private Client Services Vice President Erik Renaud about some recent client questions on the market and our current outlook. Topics include all-time market highs, Trump Administration tax and trade policy, European elections and bear market causes. We also discuss some of the economic fundamentals supporting Fisher Investments’ bullish outlook.

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

Market Insights Podcast: A Re-Introduction to The Ten Roads to Riches

By, 05/11/2017
Ratings754.06

In this podcast, we talk to Content Analyst Elisabeth Dellinger about the recently released second edition of The Ten Roads to Riches.

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

Market Insights Podcast: Adviser’s Corner - April 2017

By, 04/28/2017
Ratings393.871795

In this podcast, Fisher Investments' US Private Client Services Vice President K.C. Ellis discusses our clients’ common questions from around the country, including retirement planning, homegrown dividends and dollar cost averaging.

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What We're Reading

By , The Telegraph, 09/20/2017

MarketMinder's View: “New research from the Confederation of British Industry (CBI) claims nine in ten (91pc) of the capital’s business leaders still believe London remains a good or great base for businesses, despite Brexit-related risks.” Sure, it’s a survey, and so titular “research finds” is hardly scientific. Corporate executives’ feeling optimistic on a certain day isn’t particularly enlightening by itself. But in conjunction with evidence foreign direct investment into the UK hit record highs—and that the UK economy remains fundamentally sound despite rampant Brexit uncertainty—headlines warning that the UK won’t be open for business post-Brexit seem a wee bit off the mark.

By , Bloomberg, 09/20/2017

MarketMinder's View: “The quantity of goods sold in stores and online increased 1 percent from July, as did sales excluding auto fuel, the Office for National Statistics said Wednesday. The increase far exceeded the median forecast of economists and marked the first run of three consecutive gains since 2015.” Now we are the first to add the usual caveats to any data report, positive or negative: Don’t overreact to any one month of data, retail sales are notoriously volatile and represent only a part of total consumer spending, etc. That said, these data are evidence the UK is more ok than not. Not that the economy needed a big jump in retail sales, but it’s a nice counterpoint to Brexit doomers and those fretting falling real wages are squeezing UK households and eroding living standards. Some analysts noted retail categories like watches and jewelry drove growth—“a possible result of the weak pound attracting overseas buyers”—and there may be some truth to that. However, this also hints that tourists are benefiting while domestic consumers aren’t, and that seems a reach for a “glass half empty” perspective to us. Overall, UK consumption has held up fine throughout the Brexit saga, and we see no reason for this to change any time soon, regardless of how some folks interpret a narrow spending gauge.

By , The Chosunilbo, 09/20/2017

MarketMinder's View: “Korea’s exports grew at the fastest rate among the world’s top 10 exporters in the first quarter of this year, propped up by robust shipments of semiconductor chips. Exports for the first seven months of this year reached US$328 billion, up 16.3 percent from a year earlier, according to a monthly report by the World Trade Organization on Tuesday.” And August exports rose 17.3% y/y, the eighth straight month of double-digit growth—the longest stretch since 2011 at such a pace. While the media’s attention is focused on North Korea’s nuclear shenanigans, more important for South Korea’s stocks are strong economic fundamentals, including robust trade. August year-over-year outbound shipments to China are up 15.6%, up 23.3% to the US and 43.2% to the EU. Meanwhile, double-digit import growth—10 months positive—indicates strong South Korean domestic demand. Nuclear threats (and earlier political scandal) aren’t hampering South Korean trade, economic growth or stocks.

By , The Wall Street Journal, 09/20/2017

MarketMinder's View: Japanese media widely expect Prime Minister Shinzo Abe to call an October snap election, well ahead of schedule and with opposition in disarray. This would be the third general election since Abe’s December 2012 return to power, and interestingly: “Japan’s markets aren’t expected to soar as they did in the election years of 2012—which brought Mr. Abe’s party back to power—and 2014, when the last lower-house election was held and a coalition led by Mr. Abe’s Liberal Democratic Party won more than two-thirds of the seats.” It seems like investor sentiment is sensibly in line with Japan’s reality! And if this sentiment continues to doubt the sustainability of ok economic growth and some incremental economic reforms, it could set the stage for some surprise upside—a reason not to completely ignore investment opportunities in Japan.

Global Market Update

Market Wrap-Up, Monday, September 18, 2017

Below is a market summary as of market close on Monday, September 18, 2017:

  • Global Equities: MSCI World (+0.1%)
  • US Equities: S&P 500 (+0.1%)
  • UK Equities: MSCI UK (+0.1%)
  • Best Country: Hong Kong (+1.2%)
  • Worst Country: Portugal (-0.6%)
  • Best Sector: Financials (+0.7%)
  • Worst Sector: Utilities (-0.7%)

Bond Yields: 10-year US Treasury yields rose 0.03 percentage point to 2.23%.

 

Editors' Note: Tracking Stock and Bond Indexes

 

Source: FactSet. Unless otherwise specified, all country returns are based on the MSCI index in US dollars for the country or region and include net dividends. S&P 500 returns are presented including gross dividends. Sector returns are the MSCI World constituent sectors in USD including net dividends.