Market Update: Thurs, Aug 8, 2019 | LPL Financial Research

LPLResearch-Macro-View

Daily Insights

Markets fixate on the yuan fix. The daily level at which China’s central bank fixes the yuan, a central reference point that determines the range in which the exchange rate is allowed to float, has become the latest proxy for trade risk. When the overnight fix is stronger than expected, as it was last night, it’s taken as a sign that China is not devaluing its currency as a tool in the trade war. Equity markets responded positively to the overnight fix, with gains in Asia and Europe and the S&P 500 Index positive at market open.

China’s exports grow. While China’s exports to the United States continue to decline, China’s yearly export growth moved from 1.3% contraction in June to 3.3% expansion in July, topping consensus expectations for a 1% decline. Nevertheless, economic pressure from trade tensions with the United States persist,and it’s not clear yet if the expansion of export markets outside of the United States is a sustainable structural change or a result of temporary factors as trade patterns shift in a changing environment.

Global yields continue to fall. The 10-year Treasury yield briefly fell below 1.6% yesterday before rebounding over the course of the day, and the 30-year yield approached all-time lows. Longer-term yields have declined as the combination of attractive yields relative to other developed market government bonds, easier monetary policy globally, and safe-haven preferences during equity market volatility continue to create buying pressure in Treasuries.

Making sense of the yield curve. Longer-term yields’ drop has pushed the yield curve further into inversion, the point at which long-term rates fall below short-term rates. Even though we think the current level of rates appears disconnected from U.S. economic growth prospects, bond markets are signaling increased uncertainty. We’ll dig into the yield curve’s recent movements in today’s LPL Research blog post.

 

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.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. They are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

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.

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

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.

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.

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

 

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:

Member FINRA/SIPC

For Public Use – Tracking # 1-880952