May – June 2019

U.S. Economic and Market Highlights

  • The International Monetary Fund (IMF), projected a rebound in global growth in the second half of 2019.  An important assumption in this forecast was an improving outlook for trade tension between the U.S. and China, which ebbed and flowed over the last couple of months.

  • In May, U.S. employment growth was below economists’ estimates, at just 75,000 jobs being added compared to the Bloomberg estimate of 175,000. This could be an indication the economy might be slowing; however, the three-month average job growth of 151,000 is not too concerning.

 

  • Global equities’ uninterrupted climb higher during the first four-months of this year reversed course in May with the S&P 500 falling 6.4%. The primary catalyst behind the change in risk sentiment was the swift escalation in the trade war between the U.S. and China which included new tariffs from both sides.

 

  • Equity markets staged a strong rebound in June with the S&P 500 advancing 6.9% for the month. This turnaround was helped by indications of a pending trade deal with China, and alleviated trade-pressures, for the time being, between the U.S. and Mexican administrations. 

 

  • The 3-month U.S. Treasury Bill is yielding more than the 10-year Treasury Bond, further inverting the yield curve, which marks the first time this has occurred since July 2007. Actions and statements from Central Bankers have pushed long-term rates lower around the world. The U.S. 10-year Treasury Bond ended June at nearly 2%.

 

  • Even with increased consumer and government spending indicating a stronger business environment, the market is predicting an 85% chance that the Fed will lower short-term interest rates by 0.25% in July, because of their anticipation of slower growth in the near future.

 

  • Lower rates could be stimulus for both stocks and bonds to continue to rally, if trade agreements are worked out. However, the U.S. stock market continues to set new all-time highs while global equity prices continue to recover after several disappointing years.

 

  • With U.S. corn prices having surged by nearly 18% following a series of floods in the Midwest, and the Fed’s likely move to lower interest rates, the USD will probably lose strength compared to other currencies.

 

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The above was prepared for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security/instrument or to participate in any trading strategy. Past performance is not indicative of future results.

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