Maintaining global equity asset allocation recommendations. Spoiler alert: You will not see any meaningful changes in our recommended global equity allocations when LPL Midyear Outlook 2019 is released on Monday, June 24. Europe continues to face a number of challenges (Brexit, protests in France, Italy’s budget battle, Germany’s manufacturing weakness), while structural reforms in Japan have yet to gain much traction ahead of a scheduled VAT tax increase. Trade risk remains high but we believe Emerging Market growth will lead the world. We continue to emphasize EM in global equity allocations (along with the U.S.), which you can read more about in our Midyear Outlook-just four days away!
Fed sets the stage. The Federal Reserve (Fed) kept rates unchanged at the conclusion of its meeting yesterday, but policymakers prepared investors in a measured fashion for an eventual policy shift. The Fed dropped its “patient” policy stance in its statement and post-meeting press conference and instead reiterated Fed Chair Jerome Powell’s June 4 comments that policymakers will “act as appropriate to sustain the expansion.” Nearly half of the 17 Fed members expect a rate cut by the end of 2019, according to Fed rate projections (the “dot plot“) released yesterday.
Stocks cheer Fed caution. The S&P 500 Index posted its second Fed day gain since Powell took over as chair in March 2018. Today, the S&P 500 is poised to close at a record high on follow-through from the Fed’s new cautious stance. The 10-year Treasury yield fell below 2% for the first time since November 2016 as bond investors increasingly positioned for lower inflation and easier Fed policy. Stocks’ recovery has been encouraging, but policymakers’ hands are now tied to looser policy if conditions don’t markedly improve. We think a rate cut in July is a strong possibility, especially now that the Fed has prepared investors for that outcome. We’ll analyze yesterday’s Fed developments more in today’s LPL Research blog post.
- Initial Jobless Claims (Jun 15)
- Leading Index (MoM, May)
- Eurozone Consumer Confidence (Preliminary, Jun)
- Japan CPI Report (May)
- Nikkei Japan Manufacturing PMI (Preliminary, Jun)
- 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)
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