Economic Update 7-01-2019

Economic data for the week included a little-changed GDP report for Q1, mixed housing results and consumer confidence readings, yet a weaker durable goods report.

U.S. equity markets generally lost ground last week, while foreign equities earned small positive returns. Bonds were generally positive as rates continued to tick downward in keeping with dovish central bank language. Commodities were mixed, with crude oil gaining an additional few percent on the week, offsetting lower prices in agriculture.

U.S. stocks generally lost ground most of the week, as investors nervously looked ahead to the weekend G-20 summit, where the U.S.-China trade negotiations are again taking center stage. However, the administration has kept expectations tempered by noting that a broad deal was unlikely in this forum (as it turned out, a ‘cease fire’ was called over the weekend, with a halt in the implementation of additional tariffs for now). Comments by Fed officials, pulling back in market expectations by some of a rate cut of up to a half-percent by next month, also appeared to disappoint financial markets. By sector, financials and materials earned positive returns of over a percent, while oddly on a down week, defensives utilities, healthcare and consumer staples all lost over a percent each. Small caps also bucked the trend of broader U.S. large cap weakness by gaining a percent.

Foreign regions all generally gained ground for the week, with Europe and the U.K. outperforming the other groups slightly, with more optimism on a G-20 trade deal. In emerging markets, strength in Asia and Turkey offset weakness in Latin American nations Brazil and Mexico. 

U.S. bonds earned slight positive returns as interest rates ticked down a few basis points across the middle of the treasury yield curve. Investment-grade corporates outperformed treasuries slightly, although high yield trailed with a negative week. With a little-changed dollar, foreign developed market debt gained a bit, although emerging market bonds experienced the best week of any fixed income asset—whether in USD or local currency form.

Commodities were mixed as strength in energy and industrial metals was offset by falling prices for agricultural products. In energy, natural gas prices rose 6%, while the price of crude oil climbed again—last week by 2% to $58.50/barrel—as tensions persist with Iran in the Persian Gulf and OPEC members agreed to extend production cuts by at least another six months, placing a floor on prices.

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.