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Market Bullets September 09, 2019

For the market week ended Friday, September 6, 2019

  • US Equity Markets continued to increase last week, as economic data supportive of rate cuts combined with news that the US and China would resume high-level trade talks in October to cause a broad-based rally. The S&P 500 rose 1.8% for the week to bring its gains for the year up to 18.8%. Despite the angst in the market over the past 5 weeks, the S&P 500 is a mere 1.6% off of its all-time highs. The Nasdaq also increased 1.8% for the week and is now up 22.1% for the year, while the Russell 2000 (small-cap stocks) was up 0.7% for the week and is now up 11.6% for the year.
  • Global equity markets also rose last week, as news of the forthcoming US-China trade talks overcame ongoing uncertainty around Brexit to lead to gains. Developed Markets rallied 2.1% for the week to bring its gains for the year up to 10.3%. Emerging Markets increased 2.4% for the week and are now up 4.4% for the year.
  • US interest rates increased last week amid investor encouragement on the pending US-China trade talks. The yield on the US 10-Year Treasury rose to 1.56% from 1.50% the prior week, with the yield curve no longer inverted. The yield on the 2-Year Treasury rose to 1.52%, resulting in a positive yield curve of 0.04%

Of Interest to Us...

  • A key measure of US manufacturing activity, the ISM Manufacturing Index, declined to 49.1 in August, suggesting that the manufacturing sector contracted in the month. Note that a reading above 50 suggests expansion and below 50 suggests contraction. While manufacturing only represents about 11% of the US economy, this index has been a fairly good predictor of earnings over the next 3-4 quarters. With that said, this is the third time that the index has fallen into contraction territory over the past decade, and the prior two times were short-lived. Indeed, some of the regional manufacturing indices have begun to increase.