Weekly Market Commentary

Don’t let volatility get you down.

Last week was the 40th anniversary of BusinessWeek’s infamous cover headline: ‘The Death of Equities: How inflation is destroying the stock market.’ The publication’s current iteration, Bloomberg Businessweek, reported it is still getting grief over the headline and subsequent bull market. In its defense, stocks trended lower for about three years after the magazine hit newsstands.

Since its 1982 low point, “The total return on the Standard & Poor’s 500-stock index…with dividends reinvested has been nearly 7,000 percent. Not bad for a corpse.”

Investors worried back in 1979, just as they do today.

Weekly Market Commentary

Global selloff. Quick comeback.

Investors boomeranged from stocks to safe havens and back as trade tensions between the United States and China intensified last week. The Economist reported:

“On August 1st President Donald Trump warned that he would soon impose a 10 percent levy on roughly $300bn-worth of Chinese goods that have not already been hit by the trade war. Four days later China responded by giving its exchange rate unaccustomed freedom to fall. The yuan weakened past seven to the dollar, an important psychological threshold, for the first time in over a decade. And stock prices in America duly fell...”

Weekly Market Commentary

Tariffs strike again.

The Federal Open Market Committee completed what it called ‘a mid-cycle adjustment’ with a quarter-point rate cut last week. Some investors were unhappy when Fed officials implied there would not be another reduction this year. They’d been hoping for at least one, reported Barron’s.

Despite the disappointment, investors settled and U.S. stock markets rallied on Thursday.

Then, like a movie villain that just won’t die, U.S. import taxes – a.k.a. tariffs – reared their ugly heads and wiped out the week’s gains. Barron’s explained:

Weekly Market Commentary

The Markets

What will the Federal Reserve do now?

There was unexpected economic news last week. On Friday, the Bureau of Labor Statistics announced 224,000 new jobs were added in June, which was more than analysts had anticipated. The gains were offset a bit by reductions in April and May employment estimates. However, overall, the pace of jobs growth during second quarter was fairly consistent with jobs growth during the first quarter, reported Matthew Klein of Barron’s.

Strong employment numbers invigorated some investors. As a result, the Standard & Poor’s 500 Index, Dow Jones Industrial Average, and Nasdaq Composite finished the week near record highs.

Not everyone was jumping for joy, however.

The performance of the bond market continued to indicate some investors are worried about the possibility of recession. The yield curve remained inverted last week with the 10-year Treasury note trading at lower yields than 3-month Treasury bills. Yield curve inversions have been harbingers of recession in the past, reported Ben Levisohn of Barron’s.