Hello all – we hope you had a nice September.
Stocks bounced back from a rough August with the S&P 500 posting about a 1.9% gain on the month.
Stocks bounced back from a rough August with the S&P 500 posting about a 1.9% gain on the month.
We also closed out the third quarter, which saw a modest rise of 1.7%. The year still looks solid, though, with nearly 19% gains.
Here’s a timeline of the stock and bond market over the past quarter:
Here’s a timeline of the stock and bond market over the past quarter:
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There were two main things helping the markets this month: a thaw in the trade war and an accommodative Fed.
Starting with the Fed, they announced another interest rate cut this month and suggested more rate cuts could come if the economy weakens. Lower interest rates make it cheaper to borrow money, which hasn’t really been a problem, but it went a long way to placate the antsy markets.
Starting with the Fed, they announced another interest rate cut this month and suggested more rate cuts could come if the economy weakens. Lower interest rates make it cheaper to borrow money, which hasn’t really been a problem, but it went a long way to placate the antsy markets.
There is still a concern in the markets that rates are too high. Though these rates are near historic lows, yields of other countries around the globe are so low that it makes ours look high by comparison.
This has the bond market signaling that a recession is likely. How much of that signal has been skewed by these low global yields, though? Only time will tell, but we think these abnormal conditions are distorting the normal signals and a recession is not as likely as they suggest.
This has the bond market signaling that a recession is likely. How much of that signal has been skewed by these low global yields, though? Only time will tell, but we think these abnormal conditions are distorting the normal signals and a recession is not as likely as they suggest.
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The trade war rhetoric also seemed to cool this month. A trade meeting amongst lower-level Chinese officials went well – or at least it didn’t go bad – and that set the stage for a trade meeting with higher-ranking officials in October.
Of course, we’ve seen this story before:
Of course, we’ve seen this story before:
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While these two stories helped the markets this month, economic data is starting to see some softness. We’re still seeing good consumer spending and retail sales numbers, good jobs numbers, and the service side of the economy is solid.
However, manufacturing has seen a considerable weakening. Just today they reported figures showing manufacturing stands at a decade low. The chart below is current through August with the newly-released September number indicated by the red ‘X’:
However, manufacturing has seen a considerable weakening. Just today they reported figures showing manufacturing stands at a decade low. The chart below is current through August with the newly-released September number indicated by the red ‘X’:
This decline is weighing on optimism, with consumer confidence taking a turn lower:
And small business optimism also losing steam:
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Where does the market go from here? Like last month, it’s probably anyone’s guess at this point. The market is moving on unpredictable items like tweets from the President or comments from the Fed.
That said, stocks are a little oversold in the very short run and the odds look better for a rise here than a fall. However, this time of the year is historically a very volatile period in the markets – October in particular – so caution is always warranted. A single tweet can do a lot of damage (or good).
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
That said, stocks are a little oversold in the very short run and the odds look better for a rise here than a fall. However, this time of the year is historically a very volatile period in the markets – October in particular – so caution is always warranted. A single tweet can do a lot of damage (or good).
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
