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Market Bullets - Weekly Update

For the market week ended Friday, July 12, 2019

  • US Equity Markets rallied to new highs last week, as Fed Chairman Powell's scheduled semi-annual testimony to Congress strongly suggested that the Fed will be lowering rates later this month. In response, the S&P 500 rose 0.8% for the week to bring its gains for the year up to 20.2%. The Nasdaq increased 1.0% for the week and is now up 24.3% for the year, while the Russell 2000 (small-cap stocks) ticked down 0.1% for the week but remains up 16.8% for the year.
  • Global equity markets fell last week, as renewed political concerns in Europe combined with relatively weak economic data in both Europe and Asia to weigh on markets. For the week, Developed Markets fell 0.5%, reducing gains for the year to 12.5%. Emerging Markets dipped 0.9% and are now up 8.8% for the year.
  • Despite Fed Chairman Powell's suggestion that the Fed will be lowering rates at its meeting in late July, yields actually rose last week, as investors view the Fed's likely actions as improving the outlook for the US economy. The yield on the US 10-Year Treasury rose to 2.12% from 2.04% the prior week. Wall Street currently places a 41% probability that the Fed will cut rates twice by the end of 2019 and a 35% probability that the Fed cuts rates three times.

Of Interest to Us...

  • US companies are set to begin reporting their earnings reports for the second quarter this week. With many major US equity indices hitting new all-time highs, earnings expectations for the second quarter on Wall Street actually call for a decline of about 3.0%. The S&P 500 is currently trading at 17.1x projected earnings, which is slightly above the historical average of about 16x. It appears that investors believe that earnings growth should be increasing in the quarters ahead.