• Stocks were down for the week, marking the first negative day to start the year since 2008 while strong economic reports supported increased yields.
• Initial jobless claims came in at 339,000, an increase of 1,000 from the prior week.
• For December, the ISM manufacturing index fell slightly to 57.0.
• In 2013, Gold fell 28%, the largest annual drop since 1981.
• For the week, large-cap value, large-cap growth and small-cap stocks performed in line with one another.
• Financials, Consumer Discretionary and Health Care were the best performing sectors for the week while Energy, Utilities and Telecommunication services was the worst performing sector.
• For the week ending 1/03/14, the S&P 500 fell -0.54% closing at 1831.37. The MSCI EAFE Index lost -0.49% closing at 1898.6 and the MSCI EM Index dropped -1.81% to end the week at 979.49.
• Emerging market equities have been particularly hard hit in the first 3 trading days of this year on concerns about a slowdown in China and the impact of the Fed taper on the so-called “Fragile Five” countries – Brazil, India, Indonesia, Turkey, and South Africa. Following concerns of a credit bubble in mid-2013, it appeared that China was able to manage their shadow lending and real estate/infrastructure issues through central bank actions and promised reforms. In late December, concerns reemerged as liquidity conditions began to dry up in China. Fears were further compounded by disappointing data released last week that showed China’s manufacturing sector grew at a slower pace in December on weaker exports, prompting George Soros to comment that a Chinese slowdown is his biggest concern in 2014.
• The Fragile Five economies are also considered to be vulnerable to any outflows of capital since they share high inflation, slowing growth, and current account deficits. They were particularly hard hit following the beginning of taper talks in May 2013 and the concern is that a withdrawal of capital could hurt these economies further and cause even more outflows in a vicious circle. Fourth quarter data showed that investors pulled $11.9 billion from emerging
market equities.
