Week in Review 8.16.19

Global equity markets ended lower, following a turbulent week in which the S&P 500 recorded daily moves in excess of +/- 1% in four out of five trading sessions. Trade, and by extension, concerns about slowing global growth, were the primary culprits, along with an inversion in the U.S. Treasury yield curve.Economic data out of Germany revealed that the EU’s dominant economy- and world’s fourth largest- fell -0.1% in the second quarter weighed down by trade tensions, slowing global growth, and Brexit uncertainties. Economic data out of China was equally disappointing, with industrial production falling to a 17-year low, while retail sales were significantly weaker than expected. Those data points were enough to offset the temporary boost markets received on Tuesday after President Trump indicated that he would delay ~60% of his recently announced tariffs on an additional $300B of Chinese goods until mid-December.

In response to the new round of weak data, investors further crowded into U.S. Treasury bonds, which resulted in an inversion of the yield curve, wherein the yield on the 10-Year Treasury fell below that of the 2-Year Treasury, for the first time since 2007. Often considered a harbinger of recession, the brief inversion- it lasted less than a day- further inflamed current recessionary fears.

As various central banks have moved to cut rates in response to slowing growth, by some measures the total value of global bonds with a negative yield now stands at ~$16T.