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Weekly Market Commentary

May 13, 2019

The Markets

Trade talk trouble took a toll last week.

Major U.S. stock indices moved lower when trade talks between the United States and China broke down. The Standard & Poor’s (S&P) 500 Index, Nasdaq Composite, and Dow Jones Industrial Index all finished the week down between 2 percent and 3 percent, reported Ben Levisohn of Barron’s.

Despite the weak weekly performance, the S&P 500 remains up 14.9 percent year-to-date.

The deadline to settle U.S.-China trade issues was Friday. When it passed without any resolution, the U.S. increased tariffs on Chinese goods to 25 percent, reported the BBC.

The economic impact of higher tariffs may be relatively small; however, the impact on business confidence and global markets could be significant, reported Capital Economics.

Weekly Market Commentary

May 6, 2019

The Markets

The Standard & Poor’s 500 Index is off to its best start in 20 years.

Despite the exceptional performance of U.S. stock markets year-to-date, and data that suggest economic growth remains steady, some analysts and investors have been pecking at Federal Reserve Chair Jerome Powell. They’re keen for the Fed to implement a rate cut, which could stimulate economic growth and help push stock markets higher, because inflation is lower than ideal, reported Howard Schneider and Ann Saphir of Reuters.

Recent data suggest core inflation is at 1.6 percent. That’s below the Fed’s target rate of 2 percent. Fed leaders have said they think low inflation may be temporary. Until a trend has been established to their satisfaction, they intend to do nothing. The Reuters article explained, “…preemptive…rate moves in either direction appear off the table for now, absent some unexpected event that raises new risks or shocks the economy into a higher or lower gear.”

Weekly Market Commentary

April 29, 2019

The Markets

It wasn’t an ‘Avengers End Game’ spoiler, but there was big news last week.

Economic growth in the United States was strong during the first quarter. The Bureau Of Economic Analysis (BEA) announced gross domestic product (GDP), which is the value of all goods and services produced in the United States, increased by 3.2 percent.The estimate came as a surprise. It was well above the consensus forecast of 2.3 percent, according to Randall Forsyth of Barron’s. In addition, as The Economist pointed ou“This year America’s economy did not get the freshest of starts. A government shutdown, a wobbly stock market and concerns that the Federal Reserve would tighten monetary policy too quickly made for a dim outlook for 2019. With the effects of fiscal stimulus fading, and momentum in the global economy ebbing, most expected America’s economic growth to decelerate.”

Weekly Market Commentary

April 22, 2019

The Markets

And the answer is…

A Jeopardy! contestant captured the nation’s attention last week by setting multiple records for the most money earned in a single episode. The Standard & Poor’s 500 Index has been setting some records, too.

Michael Mackenzie of Financial Times explained:

“Less than four months through the year, the S&P 500 including the reinvestment of dividends has returned to record territory, along with the technology sector…Around the world, many benchmarks enjoy double-digit gains, led by China’s CSI 300 index, having risen more than a third already during 2019.”

Summary and Conclusion:

Asset prices rose in March as market participants became more confident that the Federal Reserve would remain on hold during 2019 regarding the level of the Federal Funds rate and trade negotiations with China would end on a positive note. Market participants were encouraged by the message from the March Federal Open Market Committee (FOMC) meeting that signaled a tapering of the balance sheet normalization program and an end of the program in September. In addition, the FOMC repeated its intention to maintain its pause in increases in the Federal Funds rate and further changes in the Fed Funds rate would be data dependent. Market participants are now more positive than they were last month that they will see no rate increases during 2019. Market prices imply no increases in the Fed Funds rate during 2019 and any change in rates would be a cut. However, the Fed has maintained its balance sheet reduction at $50 billion during April, but Chairman Powell stated during the Press Conference that they would begin tapering the balance sheet reduction and end the program in September. We should learn more about the balance sheet normalization program when the minutes of the March meeting will be released on April 10 and when the Press Release is issued after the May 1 FOMC Meeting and we hear Chairman Powell’s statements during the Press Conference. Although asset price volatility has been low during March, asset prices have responded to news on China trade negotiations (positive) and on U.S. and global data releases on economic activity (negative). Data on economic activity has been negative on balance in both the United States and the Rest of the World -- a decline in global international trade in December and January (often an indicator of an economic slowdown/recession) and weaker economic activity in China, Europe, and the United States. The IMF indicated that they will lower their outlook for the global economy when they release their global economic outlook next week. (Data releases for the United States will be distorted for the next few months because of the way the Bureau of Economic Analysis accounts for the effect of the government shutdown on published economic output and prices – lower output and higher inflation in 2019Q1 and higher output and lower inflation in 2019Q2.) The yield curve flattened and briefly inverted (U.S. Treasury 10 year – 90 day) – another signal for past recessions..

Weekly Market Commentary

April 15, 2019

The Markets

Investors took an intermission.

The curtain appeared to close on the first act of 2019 last week – and what an impressive act it was. The Standard & Poor’s 500 Index delivered some dramatic returns and is less than 1 percent away from a new all-time high.

Weekly Market Commentary

April 8, 2019

The Markets

The first quarter of 2019 brought a welcome reversal.

Last year, Barron’s published a group of market strategists’ expectations for 2019 performance. The article came out in mid-December, before the steep year-end stock market decline. At that time, all of the strategists agreed: The S&P 500 Index would move higher during 2019.

Weekly Market Commentary

April 1, 2019

The Markets

“Fascinatingly counterintuitive…”

Weekly Market Commentary

March 25, 2019

The Markets

Wonder what the Federal Reserve’s 40-yard dash time is?

Weekly Market Commentary

March 18, 2019

The Markets

Stock and bond markets rallied.

Last week, major U.S. stock indices finished higher for the 10th time in 12 weeks. Bond markets moved higher, too, with the yield on 10-year Treasuries dropping just below 2.6 percent, reported Randall Forsyth of Barron’s. Yields on 10-year Treasuries haven’t been this low since January 2018.