Market Update: Tues, June 18, 2019 | LPL Financial Research

LPLResearch-Macro-View

Daily Insights

European Central Bank (ECB) comments push markets higher. ECB President Mario Draghi, speaking at a central bank event, emphasized the bank’s readiness to add stimulus if the economic outlook doesn’t improve. Global stocks and bonds rallied and yields fell in response, with markets betting that increasingly supportive monetary policy from global central bankers would be enough to mitigate risks from slowing global growth.

The Federal Reserve’s (Fed) two-day policy meeting starts today. The Fed will release their policy statement and updated economic forecasts at 2:00 p.m. on Wednesday, followed by a press conference by Fed Chair Jerome Powell. Expectations are that the Fed will signal a likely rate cut later in the year by adjusting its language, but that a rate cut on Wednesday is unlikely. The pressure for a rate cut has increased, and the Fed will be very careful to signal a cut is on the table, but they will continue to monitor incoming data to decide if a cut is necessary. Recent data has been mixed, but weak enough that a cut may be warranted given increasing trade tensions and signs that the Fed likely overtightened in December.

New low for 10-year yield. The S&P 500 Index is higher in early trading and the 10-year Treasury yield is hovering near a 2.5-year low after Draghi’s hint at additional stimulus. Financial markets have taken direction from monetary policy speculation recently, and the Federal Reserve’s (Fed) upcoming policy announcement could heavily influence U.S. stocks’ near-term trajectory. We expect yields to rise from these levels, although we’re becoming less optimistic given benign inflation, heightened trade risk and an increasing chance that the Fed will lower rates later this year.

Bracing for turbulence. Investors are bracing for fixed income turbulence. The Bank of America Merrill Lynch Option Volatility Estimate (MOVE) Index has risen to its highest level since December 2016, indicating that investors are buying options (or hedges) on Treasuries at an unusually fast clip. We’ll dive into this cautious positioning more later today on the LPL Research blog.

LPLResearch-Monitoring-the-Week-Ahead

Click Here for our detailed Weekly Economic Calendar

Tuesday

  • Housing Starts (MoM, May)
  • Building Permits (MoM, May)
  • Eurozone Trade Balance (Apr)
  • Eurozone CPI Report (May)
  • Japan Trade Balance (May)
  • Japan Exports (May)
  • Japan Imports (May)

Wednesday

  • Federal Reserve Rate Decision (Jun)
  • Bank of Japan Rate Decision (Jun)

Thursday

  • Initial Jobless Claims (Jun 15)
  • Leading Index (MoM, May)
  • Eurozone Consumer Confidence (Preliminary, Jun)
  • Japan CPI Report (May)
  • Nikkei Japan Manufacturing PMI (Preliminary, Jun)

Friday

  • Markit US Manufacturing PMI (Preliminary, Jun)
  • Markit US Services PMI (Preliminary, Jun)
  • Existing Home Sales (MoM, May)
  • Markit/BME Germany Manufactruring PMI (Preliminary, Jun)
  • Markit Eurozone Manufacturing PMI (Preliminary, Jun)

IMPORTANT DISCLOSURES

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.

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.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All performance referenced is historical and is no guarantee of future results.

This research material has been prepared by LPL Financial LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL is not an affiliate of and makes no representation with respect to such entity.

If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are:

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit

Index data obtained via FactSet

Member FINRA/SIPC

For Public Use – Tracking # 1-964440 (6/20)