Stocks had their best week in 8 months last week, as the worst of the coronavirus fears subsided and the US economy showed some impressive resolve. Last, the LPL Strategists discuss why international stocks could finally be close to having their time in the sun after lagging the US for much of the past decade.
Developed markets have lagged the US for more than 10 years now. Although we aren’t ready to fully invest in these areas, we are starting to see signs to warm up to international equites. As the LPL Strategists discuss, valuations are historically cheap relative to the US, global growth is stabilizing, growth leadership may start to weaken, and the US dollar should be pressured lower. Should any of those four reasons begin to take place, it could create a nice tailwind for international stocks.
Equity markets bounced nicely last week, as fears over the coronavirus appear to be calming. The loss of lives is devastating, but markets are focusing on this fast spreading, yet low death rate of this virus versus other dangerous outbreaks. The LPL Strategists noted that China could very well see flat GDP growth in Q1, and a big pickup later in 2020 could be likely. Additionally, don’t forget that the US economy actually got stronger during the SARS outbreak in 2003.
Further supporting stocks last week was a trio of solid economic data in the US. The jobs report in January showed a very solid 225,000 jobs created, well above expectations. Additionally, much better than expected manufacturing data and solid services data show an economy that continues to defy the naysayers. Last, productivity in Q4 bounced, and for the year, it was the highest nonfarm productivity since 2010.
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