Perspectives

The equity and bond markets ended a volatile week last week in a somewhat optimistic mood.  Once again, trade and geopolitical events took center stage as the markets posted another week of losses.  On Wednesday, recessionary fears drove an 800 point (3%) decline in the Dow Jones Industrial Average, its biggest selloff of the year.  The equity markets fell in reaction to a yield curve inversion (that is, when the yield on the 10-year U.S. Treasury Note  fell below the 2-year U.S. Treasury N… View More

Overnight between August 13th and August 14th, the 10-Year U.S. Treasury Interest Rate dropped below the 2-Year U.S. Treasury Interest Rate.  In the investment world, this is known as a “Yield Curve Inversion.” The inversion of the 2-year and 10-year treasury is significant because historically every recession has been preceded by an inversion of the 2-year and the 10-year treasury rate and because it is uncommon to experience this yield curve inversion without a recession occurring within… View More

The term “trade war” seems appropriate in describing the escalating dispute between the U.S. and China. A week ago Friday, President Trump’s announcement a September 1st tariff increase; on Monday, China, announced it would stop buying American agricultural products and allowed the yuan to devalue to levels not seen since 2008. Subsequent commentaries speculated on the economic impacts to each side as the markets sold off and then largely recovered. Then on Friday, President Trump indicate… View More

Trade concerns continue, despite stronger-than-expected earnings results, to cast a shadow over the equity and bond markets.  Last Thursday, President Trump, dissatisfied with trade negotiations, threatened to implement a 10% tariff on September 1st for the remaining $300 billion of Chinese exports not already subject to tariffs.  The markets immediately sold off on fears that an expansion of trade tariffs with China would further damage the U.S. economy.  Last week, Nasdaq declined 3.92%; S… View More

With two dissents, the FOMC cut the fed funds rate -25bp today.  This does not have to be the start of a “long” series of rate cuts according to Fed Chair Powell, but some additional action is still possible.  Lower neutral interest rate assessments, global risk, and still-too-low U.S. inflation were mentioned as key factors for cutting rates today, despite the recent stronger-than-expected GDP and jobs reports. The statement included: “[i]n light of the implications of global developme… View More

A cottage industry has sprung up in the past decade with the sole focus of discrediting any good news on the economy. When President Obama was in office, the attacks mostly came from the right. With Presi dent Trump in Office, the attacks mostly come from the left. Since March 2009, regardless of who was in office, we have stridently argued that this recovery has legs.  The latest debate is over real (inflation-adjusted) GDP, which grew at a better than expected 2.1% annual rate in Q2. Some s… View More

If the temperature along the East coast this weekend wasn’t a reminder, with the dog days of summer also comes a shift in the market’s seasonal bias.  Ultimately, seasonality is a small consideration in our thinking, but it’s helpful in determining when to press or when to play more patiently.  With internal momentum starting to contract, we suspect the latter approach may prove prudent over coming weeks.  Whether it’s a market consolidation marked more in time or price is unknown, … View More

The equity markets treaded water for much of the week due to uncertainties related to the impact of last Friday’s strong jobs report on a potential rate cut.  On Thursday, the markets rose following Federal Reserve Chairman Powell’s Congressional testimony.  In describing the economy as “in a very good place,” he added that his main worry relates to global growth and that many Fed members “have come to the view that a somewhat more accommodative monetary policy may be appropriate.”… View More

While it’s hard to draw many conclusions from one of the lightest volume days of the year, we did find it notable that Friday’s weakness was not accompanied with any internal pressure.  In fact, advancing stocks actually outnumbered declining stocks +1.3 to 1 on Friday, despite the S&P finishing lower on the day.  Collectively about 83% of the S&P is trading above its respective 50-day moving average – consistent with a market that is likely short-term overbought, but more import… View More

The equity markets struggled to advance last week with investors focused on the G20 summit in Japan.  Presidents Trump and Xi met on Saturday; the markets interpreted President Trump’s comments on Thursday to suggest a possible resumption of negotiations.  During the meeting the two leaders were able to come up with a resolution to keep negotiations on track. The Russell 2000® Index led all indices with a 1.10% gain; the other major indices declined for the week: the S&P 500® Index d… View More