The Markets This Week

by Connor Darrell CFA, Assistant Vice President – Head of Investments
After a strong start to the new year, the major equity market benchmarks ended the holiday-shortened week flat.  Stocks struggled to gain momentum throughout the week after Commerce Secretary Wilbur Ross stated during an interview on CNBC that the US and China were “miles and miles” away from a potential trade agreement. Q4 2018 earnings reports continued to indicate healthy corporate profits, though well below the growth rates observed during the earlier parts of the year. Over the long-term, stock market performance tends to closely track corporate earnings, and analysts are still expecting double digit earnings growth for the current reporting period.

The week ended on a positive note when it was announced on Friday afternoon that policymakers had reached an agreement to temporarily reopen the government for a minimum of three weeks. The key focus of markets continued to be directed elsewhere, and there was very little reaction to the news in terms of price movement in the major indices. This is likely due in part to the temporary nature of the “deal.”

Did You Know? ESG: A Different Approach to Investing
As issues like climate change, corporate governance, and consumer privacy have become increasingly important to consumers, this has led to significant growth in what is known as ESG Investing. ESG stands for Environmental, Social, and Governance, and refers to three of the key areas of focus for evaluating and measuring the sustainability and ethical standards of an investment in a corporation.

Today, more and more investors are striving to enact changes to the role that large corporations play in society and are seeking to exert their influence via the capital markets. An ESG approach to investing uses a combination of exclusionary screens (avoiding companies that do not meet the minimum standards of sustainability and corporate governance practices of the investor) and active shareholder engagement to address key areas of concern. These include things like environmental sustainability, community engagement/impact, equal pay, and ethical business practices among others. Capital markets play a vital role in our economic system and are one of the most powerful means of influencing the behavior of large corporations because share prices and shareholder engagements directly impact the decisions of company leadership.

In response to the growing interest in ESG investing, our team has invested a considerable amount of time and resources into constructing portfolios that meet these standards. If this is something you would be interested in learning more about, please reach out to your financial advisor to begin a conversation.

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