Weekly Market Update: December 16, 2019

Top Three Market Headlines

U.S. and China Agree to a Preliminary Trade Deal: After lengthy negotiations, the United States and China finally agreed late last week on the terms of a so-called “phase one” trade deal. The U.S. agreed to cancel tariffs on approximately $160 billion of Chinese goods that had been scheduled to take effect December 15th, while cutting previously-applied tariffs on another $120 billion of Chinese goods from 15% to 7.5%. Other tariffs of 25% that had been applied to approximately $250 billion of Chinese goods would remain, however. In exchange, China agreed to remove tariffs of its own and increase purchases of agricultural and other goods from the U.S. According to U.S. representatives, additional elements of the deal address intellectual property theft and technology transfer, among other issues. 

World’s Largest IPO Takes Flight: Aramco, the Saudi Arabian state-controlled  energy company, completed its long-awaited public debut last week, offering 1.5% of the company to the public. Listed on the Tadawul exchange in Saudi Arabia, the stock drew strong investor interest, particularly from local individuals, companies and funds, pushing Aramco’s market capitalization to more than $2 trillion. While the stock’s impending inclusion in global stock market indices will broaden its ownership base, its influence on the performance of such indices will be much less pronounced given its limited float, or the shares available to trade. For instance, Morningstar estimates that Aramco will have a weighting of merely 0.06% in the MSCI ACWI Index. 

U.K. Election Provides Brexit Clarity: Conservative Party leader Boris Johnson emerged from last week’s U.K. election with a strong victory and solid parliamentary majority. The result gives Johnson a strong chance of passing a Brexit deal through Parliament, setting the stage for Britain to leave the European Union by the end of next month. The outcome provided welcome clarity to the three-and-a-half year saga and eased investors’ fears of a ‘no-deal’ Brexit. In the immediate aftermath of the news of Johnson’s victory, the pound sterling jumped 2.7% to $1.348, its largest one-day gain since January 2017.

Data Points

• The U.S. canceled scheduled tariffs on $160 billion Chinese goods
• Saudi Aramco’s market capitalization reached $2 trillion in the first two days of trading last week
• Pound sterling surged 2.7% in the wake of U.K. election results

Forbes 12/13/19, FT 12/13/19, WSJ 12/13/19, MarketWatch 12/13/19, Barron’s 12/12/19, 12/13/19, CNBC 12/13/19. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, an SEC Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC does not express an investment opinion regarding any specific commodity, sector or individual security. Unless otherwise expressly noted, the contents of this communication do not constitute securities or investment advice, nor should this communication be construed as an opinion regarding the appropriateness of any investment. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Neither Arthur J. Gallagher & Co., Gallagher Fiduciary Advisors, LLC nor their affiliates provide accounting, legal or tax advice. The information provided cannot take into account all the various factors that may affect your particular situation, therefore you should consult your Gallagher Fiduciary Advisors consultant before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.