Taking out insurance?
Economies have been slowing worldwide and the slowdown is centered on global manufacturing and trade. Where does all this leave investors?
Weekly Market Roundup
September 16, 2019
Start your week off right with our market snapshot and data visualization from the Global Investment Strategy team.
- Global stocks gained 1.4% in the latest week (18.1% YTD) led by a 1.9% gain in emerging markets and 1.3% rise in developed markets.
- In the U.S., the S&P 500 advanced 1.0% and is up 2.9% in September bringing the YTD gain to over 20% while the Russell 2000 advanced nearly 5% and is 18.2% YTD.
- Corporate credit spreads declined in the latest week led by a -24 bp fall in U.S. high yield.
- Sovereign bond yields were higher with the U.S. 10-year Treasury climbing 34 bp to 1.90%.
- U.S. small business optimism remains resilient and strong in the face of slowing growth and higher political uncertainty.
- U.S. headline inflation decreased 0.1% to 1.7% y/y in August which is the mid-point of the range in 2019 but core inflation accelerated to the highest since 2008.
- U.S. retail sales grew 4.1% y/y which is the strongest in roughly a year, highlighting the continued strength of the U.S. consumer.
- UMichigan consumer sentiment topped estimates and increased in September to 92.0 from 89.8 which was the lowest since October 2016.
- The ECB cut its main deposit rate by 10 bp to -0.5%, a new record low and announced a new quantitative easing program which includes 20 billion euro of asset purchases per month for as long as is necessary.
- U.S. Industrial Production (Tuesday)
- U.S. Fed Meeting and Rate Decision (Wednesday)
- Japan Inflation and BOJ Meeting (Thursday)
- U.S. Leading Economic Indicators (Thursday)
- Eurozone Consumer Confidence (Friday)
Monthly Market Roundup
Trade Tensions Drive Risk-off Sentiment
- 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.
- Global equities fell across the board and declined -2.3% MTD, lowering the YTD gain to 14.3% as measured by the MSCI All Country World Index. The market will likely stay in a trading range as long as trade tensions persist.
- Investors rushed to safe haven assets in August pushing sovereign debt yields in major developed economies even lower led by a 52 bp fall in the U.S. 10-year Treasury.
- The USD gained in August and is ~3% YTD as the U.S. leads other countries in higher economic growth as well as bond yields.
- Despite a resilient U.S. consumer that continues to support global growth, the market is increasingly expecting central banks to stabilize the downward shift in sentiment and economic activity.
- Slowing inflation and historically low expectations across advanced economies are reinforcing the need for central banks to increase stimulus just as concerns have risen over the effectiveness of further support.
Monthly Market Roundup Podcast
Presented by Lale Akoner,
Points of View
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.
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.