Earnings growth projections have remained positive globally, even as trade tensions have rattled financial markets this week.
Lately, headlines on the U.S.-China trade dispute have distracted investors, and a few pockets of the global economy have weakened over the last several months. Fixed income markets have positioned for a marked economic slowdown with the yield curve again nearing inversion (long-term rates falling below short-term rates).
Daily Insights
Chinese negotiators arrive in the U.S. Time is running out to avert the tariff increases slated to go into effect tonight (though actual implementation takes weeks, leaving more time for negotiations). The arrival of China’s chief negotiator in Washington today can be logically seen as a positive sign. Continue reading
Trade tensions have flared up again, and they’ve caught the stock market off guard.
The S&P 500 Index has dropped 2.1% over the past two days amid a slew of trade-related headlines. On May 6, the United States announced it would implement additional tariffs on Chinese imports at the end of the week if no trade agreement is reached. In response, China threatened its own retaliatory measures. China and U.S. officials are still scheduled to continue trade talks in Washington, D.C. May 9, but the threat of escalation looms large in investors’ minds.
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U.S. stocks fall further. Yesterday, the S&P 500 Index posted its worst day since January 3 as investors sorted through the implications of additional U.S. and Chinese tariffs. The recent equity market volatility, though unpleasant, is consistent with our expectations given our switch to a market weight allocation seven weeks ago. Continue reading
Diversified investors were the big winners in the first four months of this year.
As shown in the LPL Chart of the Day, both stocks and bonds have posted strong rallies through the first four months of this year, thanks to increased risk appetite and global demand for U.S. debt. The S&P 500 Index rose 17.5% through April, its best start to a year since 1987, while the Bloomberg Barclays U.S. Aggregate Index (the Agg) climbed 3%, its best start since 2016.
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Rough ride. Yesterday was a rough ride for U.S. equity investors, even though the overall loss wasn’t as notable. The S&P 500 Index sold off as much as 1.6% intraday, then rebounded to close down 0.4% as investors digested a slew of trade-related headlines. Continue reading
What Can Star Wars Teach Us About Investing?
Saturday, May 4, has been known throughout the galaxy as “Star Wars Day 2019.” That date was chosen because it’s a play on words of the famous Star Wars maxim, “May the Force be with you.” Therefore, on May 4 we say, “May the Fourth be with you.” Get it?
Senior Market Strategist Ryan Detrick explained, “In honor of this day, we decided to take famous quotes from the Star Wars films and extract market insights. Quantitative minds would consider these spurious relationships, but those who believe in the Force might think otherwise.”
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Trade tensions escalate again. Just as the headlines suggested a deal was close, President Trump’s threat over the weekend to raise tariff rates on $200 billion of Chinese imports and institute new tariffs on an additional $325 billion of Chinese goods has driven S&P 500 Index futures down more than 1% today. We still expect a deal in fairly short order for several reasons. This action conflicts with the tone of comments out of other key negotiators on both sides, and President Trump has a track record of getting toughest as negotiations near the finish line (NAFTA 2.0 is an example). Also, a deal is clearly in the best interest of both parties (Trump wants re-election and China wants growth). While this threat clearly increases short-term risk, and was a surprise to markets, we believe a path to compromise on using tariffs as an enforcement mechanism—the main sticking point—still exists. Continue reading
Stocks slightly higher after Friday rally
US: S&P 500 Index +0.2%, Dow -0.1%, Nasdaq +0.2%
Europe: STOXX Europe 600 -0.2%, German DAX 0.8% France CAC 40 -0.4%, U.K. FTSE 100 -0.6%
Asia: Japan Nikkei N/A, China Shanghai Composite N/A, Korea KOSPI +0.8%
Rates/Commodities: 10-Year Treasury yield -4 basis points to 2.52%, WTI crude oil -2.4%, COMEX gold: -0.4%
Modest gains gave way to mid-week selling pressure after the Federal Reserve (Fed) concluded its two-day monetary policy meeting. Then, a strong jobs report on Friday pushed the S&P 500 Index higher for the week.
The U.S. labor market may be kicking the economic expansion into another gear.
Consistent productivity growth has been largely absent from the expansion, even as payrolls and wages have grown at a healthy clip. However, strong labor market trends and last year’s pickup in capital expenditures growth could be sparking a resurgence in productivity, which we think could be key to future economic growth.