Global stocks decline. Global stocks are down this morning following a strong day for U.S. markets fueled by upbeat trade headlines. The S&P 500 Index rose 1.5% yesterday after the United States announced it would delay some tariffs scheduled to go into effect September 1, and resume trade talks with China in September. The news sparked hope of progress in U.S.-China trade talks, but there has been a lot of back-and-forth over the past several months between the two countries. We’re hopeful that a trade deal will be reached soon, as both parties have a lot to lose in a drawn-out trade dispute.
Yield curve inverts. Treasury yields fell further, and a closely watched part of the yield curve flashed a historically very early potential recession signal for the first time this economic cycle. The spread between the 2-year and 10-year Treasury yields fell as low as -2 basis points (-0.02%), turning negative for the first time since 2007. We’ve monitored the flattening yield curve closely this year, as yield curve inversion has typically preceded economic recessions, although often with a relatively long lead. While inversion on this point of the curve is discouraging, we believe yields are more of a reflection of global growth fears and attractive Treasury valuations relative to other sovereign debt, instead of a near-term recession signal. We’ll provide our takeaways on the recent yield curve inversion later today on the LPL Research blog.
Disappointing data. Germany’s gross domestic product (GDP) declined 0.1% in the second quarter, according to preliminary data, while the Eurozone’s GDP rose 0.2% in that same period. Separate data showed China’s industrial production slowed to a 17-year low in July, while China’s retail sales growth slid. Even if the United States and China reach a trade deal, there has clearly been some economic damage inflicted worldwide, and the global economy may take some time to recover.
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.
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 that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value
For Public Use – Tracking # 1-882910