China has introduced a new weapon to use in the trade war with the United States. That weapon? Its own currency. On Thursday, August 1, President Trump proposed a new slate of tariffs on Chinese goods. In response, the Chinese central bank devalued its currency – the yuan – to more than seven to the dollar. (That means that one U.S. dollar would buy you over seven Chinese yuan.) ...
August has been one of the worst months for the stock market historically. In fact, it has been the worst month on average for the past 10 years, with the S&P 500 Index down an average of 0.78% for that month [Figure 1]. Last week’s 3.1% slide for the index certainly fit that pattern, which begs the question whether investors should buckle up for more seasonal losses this month. Despite last week’s losses, 2019 has been a good year for stocks—the S&P 500 is up 17% year to date through August 2 and, excluding any losses Monday, still stands just 3% from its all-time closing high on July 26. Here we summarize August’s lackluster track record and discuss whether this August will fit the pattern.
The Federal Reserve (Fed) is likely to start an easing cycle this week, which has several investment implications. We have written a fair amount about the Fed’s U-turn in policy stance this year, including last week’s Weekly Market Commentary. That reversal from raising rates to presumably lowering them will become a reality if the Fed cuts rates at this week’s policy meeting, which concludes on Wednesday, July 31. Here we look at some potential asset allocation implications from this monetary policy transition.
The S&P 500 Index is very close to our year-end target of 3,000. The S&P 500 is up nearly 20% year to date and, after first closing above our year-end fair value target range July 12, it now stands less than 1% from our target [Figure 1]. Now that we’ve reached our target, is it time to sell? Here we provide some context for our stock market forecast to help explain why we haven’t raised our fair value target or recommended investors reduce their equities allocations.
Financial markets are focused on U.S. monetary policy, but the Federal Reserve (Fed) is only part of the story. Central banks around the world are embarking on a marked policy shift as trade tensions pressure the global economy and government becomes more intertwined with policy decisions. Global monetary policy is still historically loose, but policymakers abroad are searching for alternatives to jump-start growth, with no trade resolution in sight...
This is kind of an awkward letter and a bit late as well. When something good happens, naturally one wants to tell one’s friends. But one is reminded of the famous statement, “pride goeth before the fall.” Nevertheless, the news is so good, I thought I would risk the fall and share it with you...
