Market Update: Tuesday, June 26, 2018

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Daily Insights

  • Fixed income markets showing trade related stress. Concerns around protectionist trade policies’ potential negative affect on growth is helping to drive yields lower globally, with the 10-year Treasury yield trending lower below 2.9%. Rate hike expectations are also moving lower, especially for 2019, as investors consider the possibility that trade tensions could slowly chip away at economic growth and inflation. Trade concerns may also be helping to drive weakness in investment-grade corporate bonds, as these issuers are generally larger, global firms that may be impacted to a greater extent by trade skirmishes than high-yield issuers, which tend to be smaller and more domestically focused. We look at this phenomenon in this week’s Bond Market Perspectives, due out later today.

  • Small caps higher again last week. The Russell 2000 Index gained for the 8th consecutive week last week, its longest win streak since 8 in a row in late 2013. Although this feat of strength is quite rare, history suggests this is actually a bullish event. In fact, going out six months after this strength, the S&P 500 Index has been higher each of the past nine times. Today on the LPL Research blog we will take a closer look at this phenomena and why it could be a good sign for equity bulls in the second half of 2018.

  • An incredible streak ends. The Dow finally closed beneath its 200-day moving average for the first time in 501 trading days. In fact, only 645 days in the mid-’50s and 715 days in the mid-1980s were longer going all the way back to 1950. Here’s the catch, the S&P 500 is still comfortably above its 200-day moving average, and the Nasdaq and small caps are only a few percent away from new highs. In other words, market breadth remains strong. The Dow, meanwhile, has been hit especially hard recently due to weakness in industrials. As we discussed in Trade Tensions Playbook, industrials are one group that looks like a potentially attractive investment opportunity amid this weakness.

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Tuesday

Wednesday

Thursday

  • GDP Annualized (Q1)
  • Germany: CPI (Jun)
  • Italy: CPI (Jun)
  • Eurozone: Consumer Confidence (Jun)
  • Japan: Tokyo CPI (Jun)
  • Japan: Industrial Production (May)

Friday

  • Personal Income (May)
  • Personal Spending (May)
  • France: CPI (Jun)
  • UK: GDP (Q1)
  • Eurozone: CPI (Jun)
  • Japan: Consumer Confidence (Jun)
  • China: Mfg. & Non-Mfg. PMI (Jun)

 

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