Category: Monthly Commentary

Monthly Commentary

August Market Commentary

US stocks had a volatile month in August driven by amplified trade and recession fears.  After a lack of progress on trade negotiations, President Trump announced a new 10% tariff starting September 1st on roughly $300 billion worth of Chinese imports that had yet to be taxed.  Trump then delayed and removed some tariffs set to hit $156 billion of Chinese goods, moving them back to December 15th.  Finally, at the end of the month, the President said he would raise the tariff rate on existing and planned tariffs by 5 percentage points.  The tariffs already in place on $250 billion of Chinese goods will increase to 30% on October 1st, and tariffs planned for September 1st and December 15th on an additional $300 billion in goods will increase to 15%.  With nearly all S&P 500 companies reporting, 74% topped earnings expectations and 57% beat revenue expectations for the second quarter. Economic news showed the economy continues to grow but has cooled from earlier in the expansion.  There were 164,000 new hires in July, in line with expectations and the unemployment rate remained at 3.7%.  Retail sales rose 0.7% topping expectations.  Existing home sales rose 2.5% and they posted the first year over year gain in 17 months.  Manufacturing activity declined for the first time since 2009 and revised second-quarter Gross Domestic Product (GDP) showed the economy grew at 2.0%, down from the first reading of 2.1%.  Gold ended the month up 6.5% at $1,519 a troy ounce, moving above $1,500 for the first time in six years.  In August, US stocks fell 2.04%, however for the year to date US stocks are still up 18.02%.

Foreign stocks fell over the month driven by the trade war and weak economic news. In retaliation to US moves, China suspended purchases of US agricultural products and said it would add tariffs of 5% to 10% on $75 billion of US goods starting September 1st. China let the yuan fall below the 7 yuan to dollar level for the first time since 2008, making China’s products relatively less expensive.  The move counteracts some of the impacts of the tariffs applied to their goods.  Economic news out of Europe continued to be mostly disappointing with German industrial production in June much lower than expected, manufacturing activity declining in the eurozone and contraction of GDP in the UK and Germany of 0.2% and 0.1%, respectively.  To combat the weak economy, a European Central Bank (ECB) official said that the ECB will announce stimulus measures in September that will surpass investor expectations.  Central banks in India, New Zealand and Thailand cut their benchmark interest rates more than expected to support their economies and stem weakening growth. UK Prime Minister Johnson moved to extend Parliament’s break in a bid to reduce opposition from lawmakers who want to stop a potential abrupt exit from the European Union (EU). A sudden exit from the EU could create significant trade and governmental disruptions.  Japan posted a 2nd Quarter GDP of 1.8%, far above expectations.  Emerging markets trailed developed markets for the month and year to date.  Foreign stocks declined 2.96% in August, but are up 9.09% for the year to date.

Bonds jumped in August as interest rates sank.  During the month the two-year Treasury yield rose above the yield of the 10-year Treasury, a signal from the bond market that has preceded all recessions over the past 50 years.  Fed minutes from their July meeting showed mixed opinions about the interest rate cut that they made with some favoring a larger cut and others not wanting one at all.  Trade policy was also considered a “persistent headwind.”  At the Fed’s conference in Jackson Hole, Fed Chair Powell spoke about the large disruption to the US economy the trade war is having and stated that the Fed is likely to cut the Fed Funds Rate again soon.  The 10-year Treasury yield plunged over the month falling from 2.02% to end the month at 1.50%.  For the month, government bonds were the top-performing sector and longer-term bonds outpaced shorter-term bonds.  The broad bond market surged 2.59% in August, bringing their year to date return to 9.10%.


Index Performance  AugustYTDTrl. 1 Yr.
US Stock (Russell 3000)-2.04%18.02%1.31%
Foreign Stock (FTSE AW ex US)-2.96%9.09%-2.88%
Total US Bond Mkt. (BarCap Aggregate)2.59%9.10%10.17%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)1.19%4.14%5.65%
Municipal Bonds (BarCap 1-10yr Muni)0.84%5.53%6.70%
Cash (ICE ML 3Month T-Bill)0.19%1.60%2.32%



July Market Commentary

US stocks rose in July supported by the Federal Reserve (Fed) and better than expected corporate earnings.  Comments made by Fed Open Market Committee members during the month nearly guaranteed an interest rate cut at the Fed’s July meeting, which the Fed delivered on to close out the month. With 45% of S&P 500 companies reporting earnings to date, 80% have posted better than expected results. Analysts now expect a 2.5% contraction in earnings for the quarter, better than the expected 3.0%.  Trump and Chinese leader Xi Jinping met after the G-20 summit and got trade talks restarted with the leaders agreeing to hold off on additional tariffs at the time. Economic news was once again mixed.  There were 224,000 new hires in June, topping expectations and more individuals began looking for work, a positive sign for the economy. Consumer confidence hit its highest reading of the year, and the first reading of second-quarter Gross Domestic Product (GDP) showed the economy grew at a better than expected 2.1%.  On the downside, manufacturing, auto sales, and home sales all have posted multiple months in a row of declines.  In July, US stocks climbed 1.49% and are now up 20.48% for the year.

Foreign stocks fell over the month driven by generally weak economic news.  The eurozone economy grew at a 0.8% rate in the second quarter, a steep slow down from 1.8% growth in the first quarter.  Manufacturing confidence fell to its lowest level in six years.  The European Central Bank said it will be cutting short term interest rates for the first time since 2016 and restarting its bond-buying program.  It said it expected to keep its key interest rate at -0.4% or lower through the first half of 2020.  The changes are expected to be announced at their next policy meeting in September.  The UK’s ruling conservative party voted strong Brexit supporter Boris Johnson to become the next Prime Minister. This sets up the possibility of the UK leaving the European Union (EU) without an agreement in place between the two, potentially creating significant trade and governmental disruptions.  China posted its slowest pace of growth since 1992, falling short of expectations with a second-quarter GDP of 6.2%.  Emerging markets were in line with developed markets in July but have trailed over the year to date.  Foreign stocks fell 1.14% in July but are up 12.42% for the year to date.

Bonds edged up in July as it became clear the Fed planned on cutting the Fed Funds rate.  The Fed cut the Fed Funds rate by a quarter percentage point at their July meeting for the first interest rate cut since 2008.  The move was made to help cushion the US economy from growing global economic weakness.  The target rate is now between 2.0% and 2.25%.  The Fed also announced it would end the runoff of its $3.8 trillion bond portfolio two months earlier than expected, a supportive move for the economy.  However, investors were disappointed in comments made by Fed Chair Powell as he did not allude to any further rate cuts later in the year.  The 10-year Treasury yield was flat over the month ending at 2.02%.  For the month, credit and municipal bonds were the top-performing sectors and longer-term bonds outpaced shorter-term bonds.  The broad bond market gained 0.22% in July, bringing their year to date return to 6.35%.


Index Performance  JulyYTDTrl. 1 Yr.
US Stock (Russell 3000)1.49%20.48%7.05%
Foreign Stock (FTSE AW ex US)-1.14%12.42%-1.96%
Total US Bond Mkt. (BarCap Aggregate)0.22%6.35%8.08%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)-0.17%2.91%4.86%
Municipal Bonds (BarCap 1-10yr Muni)0.74%4.65%5.90%
Cash (ICE ML 3Month T-Bill)0.18%1.40%2.31%

June Market Commentary

US stocks climbed in June, hitting new record highs, and had the best first half of a year since 1997.  The gains were driven by expectations that the Fed and other central banks will ease monetary policy.  Comments from Fed Chair Powell showed that a cut from the current Fed Funds target of 2.25% to 2.5% was likely if trade policy negatively impacted the economy.  The US and Mexico reached a deal to avoid the implementation of tariffs threatened by President Trump.  Economic news pointed to an economy still growing, but slowing down. The May unemployment report fell well short of expectations with 75,000 new hires and April and March’s hiring was revised down. The unemployment rate held at 3.6% and wage growth remained at 3.1%.  US factory activity posted its lowest reading since October 2016, retail sales rose less than expected, consumer confidence fell to its lowest level since September 2017 and inflation remained muted.  In June, US stocks soared, gaining 7.02%, bringing the second quarter and year to date returns to 4.10% and 18.71%, respectively.

Foreign stocks bounced back in June driven by more accommodative central banks.  A eurozone manufacturing survey showed manufacturers were at their most downbeat since September 2013.  The European Economic Sentiment Indicator was at its lowest since August 2016 and German business sentiment hit its lowest level since 2014. The European Central Bank (ECB) said at the end of their June meeting they were not making any benchmark rate adjustments until at least the second half of 2020 and opened the door to a possible rate cut – a significant change in policy. Later in the month, ECB President Draghi said the central bank could roll out fresh stimulus as soon as July.  China’s manufacturing fell sharply into contraction territory in May. The Chinese government said it would accelerate the funding of infrastructure projects, injecting fresh stimulus for the country’s economy.  Emerging markets outpaced developed markets in June, but trailed over the second quarter and year to date.  Foreign stocks jumped 5.91% in June and are now up 3.13% and 13.72% for the second quarter and year to date, respectively.

Bonds moved higher in June as interest rates continued to ease.  The Federal Reserve held the Fed Funds Rate steady after its June meeting, however, comments by the interest rate-setting body led investors to strongly believe an interest rate cut was coming later this year if trade uncertainties do not improve and the economy softens further.  The 10-year Treasury yield dropped to finish the month at 2.00% down from 2.14% at the beginning of June and 2.69% to start the year. It ended the month at its lowest level since November 2016.  For the month, quarter and year to date, longer-term bonds outpaced shorter-term bonds and credit bonds were the top-performing sector.  The broad bond market rose 1.26% in June and 3.08% for the second quarter.  For the year to date, bonds have surged 6.11%.


Index Performance  June2QYTDTrl. 1 Yr.
US Stock (Russell 3000)7.02%4.10%18.71%8.98%
Foreign Stock (FTSE AW ex-US)5.91% 3.13%13.72%1.65%
Total US Bond Mkt. (BarCap Aggregate)1.26%3.08%6.11%7.87%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)0.66%1.85%3.09%4.94%
Municipal Bonds (BarCap 1-10yr Muni)0.43%1.64%3.88%5.49%
Cash (ICE ML 3Month T-Bill)0.20%0.62%1.22%2.28%

May Market Commentary

US stocks sank in May on global trade tensions.  After being dissatisfied with current negotiations, President Trump announced the US would raise tariffs on $200 billion of Chinese goods to 25% from the previous 10% level.  He also said he would impose levies of 25% this summer on $325 billion of Chinese goods that have yet to be taxed.  In addition, he signed an executive order that would ban telecommunications equipment from “foreign adversaries.”  The move would significantly impact several Chinese companies.  Finally, Trump threatened 5% tariffs on all Mexican goods beginning June 10th that would grow to 25% in October if the country doesn’t do more to stop the flow of immigrants into the US.  With nearly all S&P 500 companies reporting first quarter earnings results, 76% have beat analysts’ forecasts, and profit contracted 0.4% from a year earlier, less than the 4% analysts had expected.  Economic news was mixed over the month with 253,000 new hires in April and the unemployment rate dropping to 3.6%, its the lowest level since 1969. Both readings topped expectations.  Consumer sentiment reached its highest level since 2004.  On the downside, factory activity eased, retail sales fell, existing home sales posted their 14th straight month of annual declines, durable goods orders plunged and first quarter Gross Domestic Product (GDP) was revised down from 3.2% to 3.1%.  Oil prices fell 16.3% in May to their lowest level in three months, ending at $53.50 a barrel.  In May, US stocks plunged 6.47%, but are still up 10.92% for the year to date.

Foreign stocks slumped as trade worries dominated.  China retaliated against US tariffs with plans to increase tariffs on $60 billion of US goods.  Data showed that retail sales, fixed asset investment and industrial production all cooled in China in April.  An engine of growth for much of the recent expansion, Germany only grew at 0.4% pace in the first quarter.  At the end of the month yields on German bunds hit an all-time low.  However, the European Central Bank said they believe “the economic recovery in euro area has been delayed not derailed.”  UK prime Minister May abruptly announced her resignation as she failed to reach an agreement to take the UK out of the European Union.  Emerging markets trailed developed markets in May and for the year to date.  International stocks fell 5.15% in May, but still have gained 7.37% so far in 2019.

Bonds surged in May as interest rates reached their lowest level since 2017.  Fears of a global recession driven by trade tensions sent investors to safe haven investments.  At the conclusion of the Fed’s May meeting they signaled that they don’t foresee making any changes to the Fed Funds rate for some time, continuing to take a wait and see approach.  Core inflation has been below their 2% target, spurring some investors to think a rate cut could be on the horizon, however, the Fed believes that the inflation soft patch is temporary.  The 10-year Treasury yield fell to finish the month at 2.14% down from 2.50% to start May. It was the largest one-month yield decline since 2015.  For the month, government bonds were the top performing sector and longer-term bonds topped shorter-term bonds.  The broad bond market jumped 1.78% in May and has gained 4.80% for the year to date.


Index Performance  MayYTDTrl. 1 Yr.
US Stock (Russell 3000)-6.47%10.92%2.50%
Foreign Stock (FTSE AW ex US)-5.15%7.37%-5.85%
Total US Bond Mkt. (BarCap Aggregate)1.78%4.80%6.40%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)1.02%2.42%4.25%
Municipal Bonds (BarCap 1-10yr Muni)1.09%3.44%5.29%
Cash (ICE ML 3Month T-Bill)0.23%1.02%2.24%


April Market Commentary

US stocks continued their surge in April posting their best four month start to a year since 1987 and reaching new record highs.  The gains have been driven by a more accommodative Fed, corporate earnings topping expectations, solid economic news, and expectations of a trade agreement being reached between the US and China.  With half of S&P 500 companies reporting results, 76% have beat analysts’ forecasts, and profit is now expected to contract 1.6% from a year earlier, less than the 4% analysts had expected.  Economic news showed a more robust US economy with 196,000 jobs added in March, topping expectations, the unemployment rate remained at 3.8% and wage growth eased concerns about inflation.  Manufacturing, durable goods orders, retail sales and new home sales all outpaced expectations.  The first reading on first quarter Gross Domestic Product (GDP) showed the US economy grew at a better than expected rate of 3.2%.  In April, US stocks jumped 3.99% and have soared 18.60% since the start of the year.

Foreign stocks posted strong gains on an improved economic outlook and supportive central bank comments.  China posted strong economic numbers with manufacturing activity hitting a six-month high, a service sector reading reaching a 14-month high, and first quarter GDP growth topping expectations by holding steady at 6.4%.  In Europe, the eurozone posted a 1.5% GDP growth rate in the first quarter, picking up speed from the fourth quarter.  In addition, eurozone service sector activity hit its strongest growth rate since November and in Germany industrial output posted a solid gain.  Providing additional support for stocks, European Central Bank (ECB) President Draghi indicated the bank could take additional action if the economic picture for Europe worsened.  The EU gave the UK until October 31st to come up with a plan to leave the country bloc.  Emerging markets trailed developed markets in April and for the year to date.  International stocks rose 2.67% in April and have climbed 13.20% for the year to date.

Bonds were flat in April as interest rates rose from their lowest level of the year.  Solid economic news spurred investors to have a more optimistic view of the economy long term, driving the increase in interest rates.  Minutes from the Fed’s March meeting showed that the rate setting body had greater conviction that the best course of action was to stand pat on the Fed Funds rate for the time being.  The 10-year Treasury yield rose to finish the month at 2.51%, up from 2.41% to start April.  For the month, credit bonds were the top performing sector and shorter-term bonds topped longer-term bonds.  The broad bond market was flat in April, edging up 0.03%, but has gained 2.97% for the year to date.

Index Performance  AprilYTDTrl. 1 Yr.
US Stock (Russell 3000) 3.99%18.60%12.68%
Foreign Stock (FTSE AW ex US) 2.67% 13.20%  -3.01%
Total US Bond Mkt. (BarCap Aggregate) 0.03% 2.97%5.29%
Short US Gov. Bonds (BarCap Gov 1-5 Yr) 0.16% 1.38%3.70%
Municipal Bonds (BarCap 1-10yr Muni) 0.12% 2.33%5.04%
Cash (ICE ML 3Month T-Bill) 0.19%0.79%2.16%