Stocks take a breather. Global stocks are taking a breather this morning after two days of impressive performance. The S&P 500 Index has jumped 2.7% over the past two trading sessions, posting its first back-to-back 1% gains in nine months. Even though U.S. stocks are showing signs of recovery, we’re in the dog days of summer with light data flow. More volatility could be ahead as investors focus on headlines in the coming days.
No bottom yet for U.S. Treasury yields. Long-term U.S. Treasury yields may still be in the bottoming process. The 10-year Treasury yield dropped to 1.53% August 15, a three-year low. The benchmark yield has rebounded a few basis points since then, closing at 1.60% August 19. We still think Treasury yields are significantly mispricing U.S. economic fundamentals. However, Treasuries are still attractively valued amid ultra-low sovereign debt yields elsewhere. Because of this, we expect buying pressure in Treasuries to continue weighing down domestic yields.
Revised 10-year yield forecast. Global yields have dropped significantly as U.S.-China trade tensions have heated up over the past year. While the United States and China are expected to continue talks in September, our timetable for a potential U.S.-China agreement has been pushed out. In response, we’ve tweaked our 2019 10-year yield forecast to 1.75%-2%, down from the 2.5-2.75% forecast we published in the Midyear Outlook. For more details on our updated forecasts, check out this week’s Weekly Market Commentary: Tweaking Our Forecasts, and please see our new digital version on LPL.com.
China’s slowdown. Pressure is mounting for the United States and China to reach a trade deal. Trade tensions continue to weigh on China’s growth, as we saw from a slew of economic data released in the region last week. On the LPL Research blog today, we’ll dig into two reports on China’s growth and highlight why a manufacturing slowdown could be especially problematic for the region.
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