A remarkable six-fold increase in global sovereign debt with negative yields since 2015 underscores the unprecedented rate landscape facing investors today. This shift reflects a challenged growth environment, subdued inflation, and most importantly, the impact of QE on interest rates. As negative yields on German and Japanese bonds serve to suppress US Treasury yields, we believe investors today may benefit from leaning into credit/income strategies in search for yield.
Stocks gyrated through another volatile week as US-China trade updates and potential spillovers to the global economy dominated the headlines. Several developed markets rallied Tuesday after President Trump delayed the imposition of new tariffs from September to December, but then fell as Wednesday data suggested the standoff had already hit trade-reliant economies. Solid late-week consumer prints in the US helped the S&P 500 recover some losses, ultimately ending the week down 0.94%. The FTSE 100 and Euro Stoxx 600 fell 1.52% and 0.44%, respectively. Read More
Crude whipsawed as demand risks continued to dictate market sentiment. In its monthly report, OPEC lowered its 2019 demand forecast, but also cut its supply growth outlook. WTI and Brent prices ended the week roughly flat at $54.87 and $58.64 per barrel, respectively. Read More
The US bond market saw its first 2s10s yield curve inversion since the 2007 financial crisis, sending yields on longer-dated Treasuries below their technical levels mid-week. Investors piled into “haven” assets, driving the 10-year US Treasury yield to a low of 1.54%. The spread between the 2- and 10-year German Bunds also narrowed to 22 bps as recession fears rose on the back of trade tensions and signs of weakness in economic data. Read More
The US dollar index reversed the month’s earlier declines, supported by the current implications of solid US retail data. This partially offset drags from weaker Chinese and German data prints, sending the index up 0.87% from the week prior. The sterling also climbed 0.82% higher against the dollar on news that the UK Parliament will stand to block Prime Minister Johnson’s no-deal Brexit plan. Read More
US core CPI rose to 2.2% year-over-year (YoY), 0.1% higher than consensus expectations. Inflation was boosted by medical services and tariffs, contributing 50 bps and 3 bps to the print, respectively. In the UK, headline CPI rose marginally in July to 2.1% YoY, against consensus expectations of a decline to 1.9% YoY. Read More
In a volatile week, consumer data provided reassuring signs for the US economy. Retail sales rose 0.7% in July, more than the expected 0.3% increase. The UMich Consumer Sentiment Index reported at 92.1, a slip from the prior month but still a robust reading. Read More
In the euro area, industrial production (IP) data for June printed slightly below consensus at -1.6% month-over-month (MoM), revealing a broad-based decline across all industries. Similar declines were felt in China and the US. Chinese IP posted 0.2% MoM for July, down 0.5% from the prior month, reflecting weakness in textiles, chemicals, communication equipment and steel products. US IP shrunk to -0.2% MoM, pressured by contraction in the manufacturing and mining sectors. Read More
For style performance, Large, Mid, and Small refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Government, Corporate, and High Yield refer to the US Treasury index, the US Corporate Credit index, and the US High Yield index, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality.
Eurozone HICP YoY (Cons: 2.9%, Prior: 2.7%)
Initial US Jobless Claims (Cons: 218k, Prior: 220k)
US Markit Manuf. PMI (Cons: 50.5, Prior: 50.4)
Eurozone Markit Manuf. PMI (Cons: 46.2, Prior: 46.5)
“Euro PMI” refers to the Markit Eurozone Composite Purchasing Managers’ Index. “Cons. Conf.” refers to US Consumer Confidence. “GE IFO Business” refers to the German Ifo Business Climate Survey. “New Home Sales” refers to US New Home Sales (MoM). “Dur. Gd. Ord.” refers to US Durable Goods Orders. “UK GDP” refers to the QoQ estimate of the United Kingdom’s Gross Domestic Product for Q3. “Euro M3” refers to the YoY change in the Eurozone’s M3 Money Stock. “US GDP” refers to the estimate of US Gross Domestic Product for Q3. “Pers. Cons.” refers to US Personal Consumption. “UMich Cons. Sent.” refers to the University of Michigan Consumer Sentiment Index. “Japan Core-Core CPI” refers to Japan’s Consumer Price Index (ex- Food, Energy YoY).
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