Global markets have lost more than $4 trillion in the first week of trading in 2016 -- the worst performance as far as records go over a century. Sliding oil prices, global growth concerns, and the future path of the federal funds rate remained in focus. Renewed volatility in Chinese markets revived lingering doubts over the ruling Communist Party’s ability to manage the world’s second-largest economy's slowdown and transition to the third largest global reserve currency component under the aegis of the IMF Special Drawing Rights (SDR) currency unit.
While the S&P 500 clearly struggled to start the year, other global equity markets had an even more difficult time as China's CSI 300 index plunged 9.9% during a week that featured two early closures after the index declined 7.0%, tripping its circuit breakers. The second instance took place on Thursday, ending the session before the opening hour was up. As a result, Chinese officials removed the circuit breaker mechanism after implementing it at the beginning of the week.
The resulting growth concerns manifested themselves through continued weakness in oil prices as WTI crude surrendered 10.8% for the week, settling at its lowest level since December 2008. To be fair, there was a pocket of strength in the commodity space as gold futures rallied 3.5% to $1,097.50/ozt.
Friday 1/8/16 EOD
All ten sectors ended the first week of 2016 in the red. The utilities sector shed just 0.4% while other countercyclical groups like consumer staples, telecom services, and health care posted respective weekly losses of 2.9%, 3.0%, and 5.6%. On the cyclical side, energy and materials lost 6.8% and 7.8%, respectively, while the consumer discretionary sector outperformed, falling 5.9%.
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