August – September 2019

U.S. Economic and Market Highlights


  • Former Fed Chair Janet Yellen, and other economists, have observed that the current yield curve inversion may be different, and not indicate a pending recession, because other factors have influenced yields. As a result, the curve may be distorted and its recession signaling power may be diminished.
  • This economic cycle has been an atypical environment for bond markets due to nontraditional central bank actions. The unprecedented stimulus programs of Central Banks in response to the 2008 financial crisis created higher-than-normal demand for long-term Treasury bonds.
  • Central Bank policies in Europe and Japan have created negative interest rates, which have created higher demand for U.S. Treasury Bonds in search of better yields and low risk.
  • Leading Indicators in the U.S. are still showing positive year-over-year growth, unemployment claims remain very low at 3.7%, and corporate profits are still growing.
  • Despite positive economic data in the U.S., the Federal Reserve lowered interest rates in September for the second time in three months, and the European Central Bank announced a large stimulus package, on concerns about a slowdown in global growth and trade policy uncertainties.
  • These proactive actions taken by Central Banks will likely defer, or mitigate the impact of, the next Recession.


  • Another month of sharp declines in U.S. government bond yields during August led to lower mortgage rates which increased the number of new and existing home purchases and improved home affordability.
  • Over the past twelve months, yields on the 10-year U.S. Treasury bond plunged from 3.14% a year ago to 1.50% on August 30. Rates were up slightly in September.
  • German yields are now negative along the entire yield-curve, and Japanese short-term rates are negative due to increased tariffs with South Korea, which will likely slow economic growth.
  • Emerging market fundamentals remain relatively strong as leverage is still far lower than developed market economies and economic growth is projected to be faster than in developed countries.


  • An inverted yield curve does not signal immediate trouble for equities because there are still positive economic data leading U.S. equity markets to near all-time highs including; a relatively strong labor market, accommodative interest rates, and easing bank lending standards.
  • However, geo-political uncertainties, such as: the U.S.-China trade war, October 31 Brexit deadline, and Hong Kong protests will continue to spark stock market volatility, which will likely keep the demand high for safer assets such as government bonds and gold.
  • Recent consumer and investor surveys indicate reduced business and consumer confidence and an uptick in bearish stock market sentiment.


  • The private equity industry is responsible for an increasing percentage of the overall transaction volume in the U.S. as managers look for buyout opportunities.
  • The gap between the number of privately-owned companies (7,737) and public companies (4,397) in the U.S. continues to grow as investors add more capital to private equity funds/firms, which expands the number of investment opportunities.
  • Private equity provides a positive value opportunity as average middle market U.S. buyout transaction multiples remain at a discount relative to public market valuations.
  • Private credit/lending funds continue to take market share as well, as banks have reduced their lending activity to private markets. More institutional investors are willing to invest in private credit funds and sacrifice liquidity for the higher yielding returns available from private loans.

[See the Market Tracker below for additional statistics and Global Market Indices.] 

This communication 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.