More Signs of Slowing Global Growth

U.S. stocks have held up fairly well over the past week even as U.S.-China trade tensions have flared up. The S&P 500 Index is less than 3% below its record high on April 30.

U.S. stocks’ resilience has been especially encouraging amid more signs of slowing global growth. Global manufacturing surveys for April indicated that the year-long slowdown in global manufacturing activity continued. Global leading economic indicators from the Organisation for Economic Co-operation and Development (OECD) pointed to more weakness ahead, particularly in Europe, Japan, and the United Kingdom, but also for the United States.

We have seen some evidence of stability in European data lately, but global purchasing managers index (PMI) and leading indicators show better growth earlier this year may prove temporary. Significant political challenges in the United Kingdom, Italy, and France also linger on the horizon.

The OECD assessment actually improved for China, reflecting stimulus put in place. But the latest round of Chinese economic data (including retail sales, factory output, capital investment, and foreign direct investment in China) pointed to further slowing of the Chinese economy.

Signs of weakness in China could bode well for trade talks and help bring the Chinese to the bargaining table.

“Downside risk to global growth has increased due to escalating U.S.-China trade tensions and further weakness in Europe,” said LPL Chief Investment Strategist John Lynch. “The latest batch of global leading indicator data painted a more favorable picture of emerging markets overall, but less favorable for Europe.”

Positive trade developments with other regions have helped buoy U.S. stocks over the past couple of days. The United States is delaying a decision on European and Japanese auto tariffs by as much as six months. U.S. trade officials are also reportedly making progress toward a resolution on steel and aluminum tariffs with Mexico and Canada.

However, China remains the big fish. We believe the Trump administration is very serious about not settling for just any deal. We expect an agreement eventually, but resolution may not come until well into the summer, and more market volatility in the interim is likely. Stay tuned.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured.  These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency.  The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.


For Public Use | Tracking # 1-853991 (Exp. 05/20)