Category: Monthly Commentary

Monthly Commentary

October Market Commentary

US stocks touched new record highs in October driven by positive trade news, better than expected corporate earnings and encouraging economic news.  The US and China held trade talks in Washington during the month and President Trump announced the US and China had reached a “Phase One deal” on trade.  The US agreed to not implement tariffs set to go into effect in October and China will increase its purchases of US agricultural goods.  While earnings are set to decline for a third straight quarter, 75% of the 342 S&P 500 companies that have reported earnings to date have beaten expectations.  Economic news reflected a resilient US economy. Employers added 136,000 employees in September, slightly below expectations, but August and July hiring numbers were revised higher. The unemployment rate reached a half-century low of 3.5%.  US consumer sentiment rose in early October and US economic growth rose 1.9% in the third quarter, a slightly slower pace than the second quarter, but better than the 1.6% expected by economists.  On the downside, manufacturing contracted for a second straight month, auto sales fell 1.4% over the first nine months of the year and retail sales fell 0.3% for the first monthly decline since February.  In October, US stocks climbed 2.15% bringing the year to date performance to 22.68%.

Foreign stocks were again the top-performing asset class in October driven by supportive central banks and hopes over US/China trade discussions.  Purchasing manager surveys pointed to a continued slowdown in manufacturing activity in Europe and Asia. Eurozone investor confidence fell to a six-year low.  After the stimulus plans outlined at their September meeting, the European Central Bank elected to not make any policy changes at its October meeting.  However, three developed and nine emerging market countries central banks cut interest rates during the month.   China’s third-quarter GDP growth slowed to 6%, a 26 year low.  It’s at a low level of the range targeted by the Chinese government.  Negotiators from the UK and EU were able to reach a deal on the UK’s exit from the country bloc, however, the agreement has yet to pass Parliament.  As a result, EU leaders agreed to a three-month extension of the Brexit deadline to 1/31/20.  Emerging markets outpaced developed markets for the month, but trail over 2019.  Foreign stocks rose 3.59% in October and have surged 16.03% for the year to date.

Bonds gained over the month as interest rates held steady. Minutes from the Fed’s September meeting showed officials became increasingly concerned that slowing global growth could more significantly slow US hiring and economic activity.  They cited muted inflation, trade policy uncertainty and weak global growth for support on cutting their benchmark interest rate at that meeting.  At the Fed’s October meeting they elected to cut the Fed Funds Rate by 0.25% for the third time in as many meetings.  The Fed now targets a range of 1.5%-1.75% for its benchmark interest rate.  They also said that they would not reduce the rate further unless there was a clear deterioration of the economy.  The 10-year Treasury yield rose and then declined over the month to finish flat at 1.69%.  For the month, generally, shorter-term bonds outpaced longer-term bonds and credit bonds were the top-performing sectors.  The broad bond market rose 0.30% in October and is up 8.85% for the year to date.


Index Performance  Oct.YTDTrl. 1 Yr.
US Stock (Russell 3000)2.15%22.68%13.49%
Foreign Stock (FTSE AW ex-US)3.59%16.03%11.88%
Total US Bond Mkt. (BarCap Aggregate)0.30%8.85%11.51%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)0.32%4.21%5.89%
Municipal Bonds (BarCap 1-10 Yr Muni)0.32%5.07%7.04%
Cash (ICE ML 3 Month T-Bill)0.19%2.01%2.40%


September Market Commentary

US stocks rebounded in September driven by some improvement in US/China trade discussions and support from the Fed.  The US and China agreed to hold trade talks in Washington in October, reigniting hopes for a deal.  Trump announced the US would delay by two weeks tariffs set to begin 10/1/19 on $250 billion of Chinese imports and China said it will exempt certain agricultural products from the US from tariffs. Economic news showed a generally cooling economy.  Employers added 130,000 employees in August, below expectations and June and July hiring numbers were revised down.  The unemployment rate remained at 3.7% and wage growth held steady at 3.2%.  Manufacturing contracted for the first time in three years, small business confidence fell to its lowest level since 2012, consumer confidence fell more than expected in September and consumer spending slowed more than expected in August.  On the positive side, existing homes sales rose 1.3% in August, much higher than expected, and posted the first year over year gain in 17 months.  In September, US stocks rose 1.76% bringing the third-quarter performance to 1.16%.  For the year to date, US stocks have surged 20.09%.

Foreign stocks were the top-performing asset class for the month driven by supportive central banks and hopes over US/China trade discussions.  Economic news continued to be weak globally with contractions in manufacturing in Japan and Europe.  As a result, the European Central Bank cut its benchmark interest rate by 0.1% to -0.5% and launched a new bond buying package of $22 billion a month of eurozone debt that is expected to “run for as long as necessary.”  It’s the largest simulative move the central bank has made in three and a half years. In China, a manufacturing survey reached a five-month high, but concerns over the economy drove the central bank to inject the equivalent of $126 billion into the banking system in hopes of spurring the economy.  Negotiations between the European Union (EU) and Britain over Britain’s exit from the country bloc remain ongoing with a deadline of the end of October.  Britain’s Parliament approved a measure to block Britain from leaving the EU without an agreement, but currently, many diplomats see a no deal exit from the EU as the most likely scenario.  Saudi Arabia oil production facilities were attacked driving up the price of oil, but after it became clear they would be able to return to normal production levels quickly, oil fell and ended the month flat.  Emerging markets trailed developed markets for the month, quarter and year to date.  Foreign stocks rose 2.67% in September but were down 1.51% for the third quarter.  For the year to date, foreign stocks have climbed 12.01%.

Bonds ticked down over the month as economic concerns eased from their August levels.  The Fed voted to cut its benchmark interest rate to a range from 1.75% to 2.0% at their September meeting and comments made by Chairmen Powell left open the possibility of additional rate cuts.  The fed cited cushioning the US economy from a global economic slowdown and the US/China trade war.  The 10-year Treasury yield rose over the month to 1.68% after starting the month at 1.50%, however, it is down from 2.00% at the start of the quarter.  For the month, credit bonds were the top-performing sector and shorter-term bonds outpaced longer-term bonds.  For the quarter it was the reverse with Treasury bonds and longer-term bonds the top performers.  The broad bond market fell 0.53% in September but was up 0.75% for the third quarter.  Bonds have gained 8.52% for the year to date.


Index Performance  Sept.3QYTDTrl. 1 Yr.
US Stock (Russell 3000)1.76%1.16%20.09%2.92%
Foreign Stock (FTSE AW ex US)2.67%-1.51%12.01%-0.81%
Total US Bond Mkt. (BarCap Aggregate)-0.53%2.27%8.52%10.30%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)-0.25%0.77%3.88%5.69%
Municipal Bonds (BarCap 1-10yr Muni)-0.76%0.81%4.73%6.42%
Cash (ICE ML 3Month T-Bill)0.17%0.53%1.76%2.33%


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%