Week in Review
Week Ending: Friday, August 30, 2019
Recap & Commentary
After four consecutive weeks of declines, markets ended August on a high note, with the S&P 500 recording its best weekly gain since early June. The week was marked more by what didn’t happen, any new negative headline-grabbing announcements about tariffs; than what did, a slightly more constructive tone from both U.S and Chinese officials. Without any last-minute deal, recently announced tariffs took effect on Sunday, September 1. As a result, the U.S. will now charge a 15% tariff on an additional $110B of Chinese goods while China will raise existing tariffs on $75B of U.S. goods by 5-10%.
As we enter September, historically the worst month of the year for equity markets, investors will largely remain focused on trade, interest rates, and the Fed. Macro economic data will also be closely scrutinized, to determine the extent to which trade tension are impacting the global economy.
In the U.K., new PM Boris Johnson announced, and the queen approved, a plan to suspend Parliament for nearly five weeks, from mid-September to mid-October. On the surface, Johnson’s request was not unusual. A new PM typically makes such a request to provide time for the new government to develop their legislative agenda. What was unusual about Johnson’s request was the length. At five weeks, it marks the longest suspension since 1945. While Johnson claimed that his government simply needs time to develop their agenda, critics cast the move as an attempt to hinder Parliament from blocking a no-deal Brexit, which Johnson favors.
Economic Bullet Points
US GDP was revised down -0.1% to a seasonally-adjusted annual rate of 2.0% in the second quarter, a solid pace but down significantly from the 3.1% annual rate in the first quarter, and 2.9% overall in 2018. Despite continued weakness in global growth and trade concerns, this recent GDP reading is a reminder that the strong labor market remains a solid underpinning for consumer spending.
Durable Good Orders climbed 2.1% in July, beating the 1.1% consensus estimate, led by double-digit gains in aircraft orders. Core orders (nondefense, ex. aircraft) rose 0.4% in June. While the readings were better than expected, several forward-looking indicators are pointing to softening in coming reports.
Personal Income & Outlays — Personal income ticked up 0.1% in July, below the consensus of 0.3%. Disposable income rose 0.3%, and personal consumption expenditures increased by 0.6%. The July income increases reflected increases in employee compensation and government social benefits.
Personal outlays increased $96.4 billion in July. Personal savings came in at $1.27 trillion, and the personal savings rate as a percentage of disposable personal income ended at 7.7% in July.
Consumer Confidence declined sharply in August, a sign that trade tensions are finally garnering meaningful attention from consumers.
Greece officially lifted the last of its capital controls on Sunday, September 1. The controls were imposed in 2015 to help avoid a collapse of the banking system at the height of the Greek debt crisis.
|U.S. Bond Market||0.2%|
|10-Year Treas. Yield||1.50%|
|WTI Oil ($/bl)||$55|
The Week Ahead
- Employment Situation Rep.
- ISM/PMI Mfg. Data
- ISM/PMI Services Data
- International Trade
- Factory Orders
- Jobless Claims