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.