Weekly Market Commentary

Weekly Market Commentary

The Markets

From trade wars to impeachment inquiries, investors had a lot to ponder during the third quarter. Toward the end of September, they appeared to become more cautious, although it’s difficult to say which issues weighed most heavily. Here are a few questions they may have been asking:

Is recession looming closer?

While there are signs of slower economic growth – including last week’s weakening economic data – the chance of the economy moving into a recession during the next 12 months remained relatively low, according to the New York Federal Reserve. It put the probability of recession by August 2020 at 38 percent. In other words, the likelihood there would not be a recession was 62 percent.

“We would recommend a little less focus on the ‘recession on/off’ debate and position on a slowdown thesis,” suggested a research director cited by Barron’s.

Weekly Market Commentary

They say bull markets climb a wall of worry.

Investopedia’s Will Kenton explained the idea like this:

“…a bull market isn’t a peaceful place. When times are good, investors are constantly tense, wondering how long they will keep rolling, fretting about when a seemingly inevitable correction will finally put a stop to the market elation. As a market continues ascending, the decision can become increasingly agonizing whether to take profits in a position or let it ride.”

Last week, the wall of worry gained a few feet.

Weekly Market Commentary

There’s a new theory in town.

Renowned economist Robert Shiller’s new book suggests investors may be able to predict and prepare for economic events by tracking popular stories.

Applying the theory might have been a challenge last week. There were so many stories with potential to move markets and affect the economy it was difficult to guess which would be the most influential.

In the end, on-again-off-again trade negotiations provided the spark that drove markets lower. Barron’s explained:

“The S&P 500 would have finished flat for the week – except it decided to drop 0.5 percent after reports that China had canceled a visit to Montana hit the newswires…That’s not what we would have expected, given all of the week’s excitement. Saudi Arabia’s oil infrastructure was attacked. The Federal Reserve cut interest rates by a quarter-point. U.S. money markets went crazy and forced the Fed to intervene, setting off comparisons to the collapse of Lehman Brothers in 2008. And, yet, a Montana junket was the ultimate determinant of whether the market finished up or down.”

Weekly Market Commentary

Remember the movie Groundhog Day?

Bill Murray’s character is a crotchety newsman who lives the same day over and over again. After exhausting other options, he chooses self-improvement and eventually escapes the cycle.

The movie came to mind last week when the United States and China headed to the negotiating table. Again.

Global stocks rallied on the news. Again.

The U.S.-China trade war has had a significant impact on stock market performance during the past two years. Since the trade war began, U.S. stock markets have rallied when trade talks are announced and retreated when trade talks fail. In 2018, MarketWatch reported: