Global headlines. U.S. stocks are slightly lower this morning as investors assess several global headlines. The Shanghai Composite Index slid 2.8%, its worst daily drop in eight months, on news that China is expanding travel restrictions to curb a dangerous viral outbreak. The European Central Bank announced it would leave monetary policy unchanged, and that it would conduct a review of its policy strategy after years of tepid inflation. There’s a lot of news to digest out there, especially in the middle of fourth quarter earnings season, but we don’t think today’s headlines change the macroeconomic picture significantly.

Global stocks slide. China’s virus outbreak has weighed on global stocks so far this week. The MSCI All-World Country Index has dropped 0.3% through Wednesday, poised for its biggest weekly decline since November 2019. That’s not a big drop, but it’s a step back after three months of impressive gains. MSCI’s gauge of emerging market stocks slid 1.2% through Wednesday, while MSCI’s measure of developed market stocks declined 0.3% over the same period.

Small caps struggle. Stock markets around the world have hit new record highs this year, but U.S. small cap stocks have yet to join the party. The Russell 2000 Index of small cap stocks hasn’t closed at a record high since August 2018. In that same period, the S&P 500 Index has posted 42 record highs, and the Dow Jones Industrial Average has reached 32 record highs. 

Good news on trade. The U.S.-China phase-one trade agreement could be a positive step in the right direction for this economic expansion. 

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