This Weekly Market Update reviews the top three market headlines: Reports of the Coronavirus’ Impact Emerge,U.S. Dollar Climbs, Japanese GDP Shrinks in Q4

Data Points

Top Three Market Headlines

Reports of the Coronavirus’ Impact Emerge: A handful of companies last week issued warnings about negative business impacts from the coronavirus outbreak, which has caused factory shutdowns and store closures across China. Apple reported that both its sales in China (which accounts for nearly a fifth of the company’s revenue) and the production of iPhones have been affected. Similarly, Nike, Adidas and Puma all cautioned that sales have suffered, while smaller companies that source goods from Chinese producers have also noted mounting supply chain pressures. Amid on-going efforts to contain the disease, such reports may lead investors to reconsider expectations for global trade and economic growth in the early part of 2020, while also renewing speculation about central banks taking steps to combat the epidemic’s economic toll.  

U.S. Dollar Climbs: The ICE U.S. Dollar Index, which tracks the currency against a basket of peers, touched its highest level in nearly three years last week, bringing its year-to-date gain to more than 3%. The recent strength reflects the dollar’s continued safe haven status amid challenged economic growth overseas, geopolitical trade unrest, and, possibly, concerns over the spread of the coronavirus in Asia. While a stronger U.S. dollar eases the prices of goods imported to the U.S. from other countries, it also has a negative effect on the earnings of U.S. companies that derive sales from overseas when such earnings are translated to U.S. dollars for financial reporting purposes. 

Japanese GDP Shrinks in Q4: Japan’s total economic output declined 1.6% in Q4 of 2019, raising the risk of recession in the world’s 3rd largest economy. On an annualized basis the decline was even more severe, down 6.3%. The largest contributor to the fall was a drop in private consumption after the national sales tax was raised from 8% to 10% in October. In addition, the country is facing decreased tourism and industrial output due to the coronavirus outbreak. To combat the slowdown, the Japanese government in December enacted a significant $120 billion stimulus package that it hopes will spur growth in 2020.

As of February 24, 2020 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World -1.24% 1.48% 1.48% 16.44%
S&P 500 -1.22% 3.59% 3.59% 22.68%
Russell 2000 -0.52% 0.74% 0.74% 8.09%
MSCI EAFE -1.24% -1.53% -1.53% 10.42%
MSCI Emerging Markets -1.96% -2.65%  -2.65%  5.85%
FTSE NAREIT 0.29% 6.58% 6.58% 18.45%
Bloomberg Commodity 1.18% -5.52% -5.52% -4.90%
Barclays U.S. Aggregate 0.57% 2.47% 2.47% 10.29%

CNBC 02/17/20, 2/19/20; WSJ 2/17/20, 2/21/20. 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.