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Negative Charge

The global slowdown has intensified since our last edition and downside risks are rising. Where does all this leave investors?

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Weekly Market Roundup

October 21, 2019

Start your week off right with our market snapshot and data visualization from the Global Investment Strategy team.

WHAT HAPPENED


  • Global stocks advanced 0.8% in the latest week (1.0% MTD) led by a 1.3% rise in emerging markets (2.4% MTD) followed by 0.7% in developed markets (0.8% MTD).
  • In the U.S., the S&P 500 delivered a 0.6% return (0.4% MTD), the NASDAQ increased 0.4% (1.2% MTD), and the Russell 2000 climbed 1.6% (0.8% MTD).
  • Longer term sovereign interest rates across developed economies advanced modestly with the 10-year U.S. Treasury gaining 2 bp to 1.75% and 6 bp for the 30-year Treasury to 2.25%.
  • U.S. high yield corporate credit spreads tightened but are still 10 bp higher MTD.
  • The U.S. majors dollar index fell -1.0% and is -2.1% in October.
  • S&P 500 Q3 earnings are expected to decline -4.8% y/y after falling -0.4% y/y in Q2. Twenty percent of the market cap weighted S&P 500 has reported results.
  • U.S. retail sales fell -0.3% m/m for the first contraction in seven months in September. On a year over year basis, retail sales grew 4.1% and remain near the highest rate in 2019. A continuation of U.S. consumer strength is key both to the U.S. and global outlook.
  • U.S. industrial production declined -0.1% y/y in September, the first contraction in two years. Growth has steadily declined from a multi-year peak of 5.4% in September 2018 highlighting the persistence of the manufacturing slowdown.
  • U.S. capacity utilization fell -0.4% m/m to 77.5% and is near the lowest in two years. Utilization has declined ~2.0% over the last year and from the highest since mid-2008. Lower resource utilization further reinforces the likelihood of limited inflation upside.
  • The U.S. Conference Board leading economic indicator index expanded only 0.4% y/y in September and is near the lowest in 10-years. The index has fallen sharply over the last year after reaching 6.6% y/y in September 2018 and suggests GDP growth will remain modest over the next 12-months.
  • The British parliament delayed a vote on a Brexit deal agreed to by the EU and Prime Minister Boris Johnson by three months over the weekend.
  • China’s Q3 GDP missed estimates (6.1% y/y) and fell 0.2% from Q2 to 6.0% y/y, the worst since 1992. China’s slowing and worse than expected growth highlights the extent of the global slowdown and the negative impact of the trade war.
  • China trade was worse than expected in September. Exports declined -3.2% y/y and imports were lower by -8.5% y/y. Exports to the U.S are down 22% year over year.

WHAT'S AHEAD


  • U.S. Existing Home Sales (Tuesday)
  • European Central Bank Meeting (Thursday)
  • Eurozone Markit Manufacturing and Services PMI (Thursday)
  • U.S. Durable Goods Orders (Thursday)
  • U.S. Markit Manufacturing and Services PMI (Thursday)
  • U.S. New Home Sales (Thursday)
VIEW VISUALIZATION

Monthly Market Roundup

October 2019

Slowing Growth, Risks Remain

  • Slowing growth is widespread and risks remain to the downside.
  • Global manufacturing continues to be negatively impacted by the trade war.
  • While the U.S. remains the strongest and most resilient led by a still strong U.S. consumer and less exposure to trade, it is also showing signs of softening growth.
  • The trade war continues to be deflationary and both actual and expected inflation continue to shift lower forcing central banks to ease.
Find out more

Monthly Market Roundup Podcast
Presented by Lale Akoner,
Marketing Strategist

September 2019

Risk-off sentiment dominated in August as tit-for-tat tariffs were imposed by the U.S. and China, China devalued its currency, and the U.S. 2s10s yield curve inverted for the first time since 2007.

Trade Tensions Drive Risk-off Sentiment
DOWNLOAD THE ROUNDUP

Monthly Market Roundup Podcast
Presented by Lale Akoner, Marketing Strategist

August 2019

Global stocks edged slightly higher in July and bond yields were flat to lower as central banks turned increasingly dovish

Slowing Growth vs. Easy Central Banks
DOWNLOAD THE ROUNDUP

Monthly Market Roundup Podcast
Presented by Lale Akoner, Marketing Strategist

Monthly Market Roundup - October 2019

 

Monthly Market Roundup - September 2019

 

Monthly Market Roundup - August 2019

Points of View

What’s priced into markets?

U.S. equities: Why we still expect a positive calendar year…

While longer-term valuation measures show historically elevated valuations and thus imply lower future returns, lower real discount rates means equilibrium equity valuations are higher than in the past.

 

Read More

U.S. Treasuries: Why we think recession fears are unjustified

Given dramatic moves in risk markets, we provide a brief update of what we think markets are currently pricing in along with implications for investing.

 

Read More

Global Economics and Investment Analysis Group

Meet the minds behind the research.

Shamik Dhar

Chief Economist

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Alicia Levine, PhD

Chief Strategist

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Liz Young, CFA

Director of Market Strategy

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Lale Akoner

Market Strategist

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Bryan Besecker, CFA, CAIA

Market Strategist

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