Weekly Market Review: June 24, 2019

Weekly Market Review: June 24, 2019

241
SHARE

Last week’s press conference following the Fed’s two-day meeting presented Chairman Jerome Powell, on the job for less than 17 months, with a significant challenge – how to describe the U.S. economy in an optimistic light, but at the same time firmly communicate the central bank’s willingness to come to the rescue should aid be needed. Powell, the first Fed Chair in more than 30 years not to hold a Ph.D. degree in economics, delivered a “dovish” tone that indicates the Fed will “act as appropriate to sustain the (nation’s) expansion” (source: Federal Reserve).

Powell’s signal that he is willing to cut rates quickly rippled across many U.S. securities. Both stocks and bonds were already hoping that interest rates cuts could occur as soon as late July 2019, but now they appear to be expecting that action. The S&P 500 index closed at a record level on Thursday 6/20/19, its 5th record close for the year and 212th in the 10 1⁄4 year bull market run. The yield on the benchmark 10-year Treasury note dipped to 1.99% last week, its first time below 2% since November 2016. Lower interest rates translate into a weaker U.S. dollar, just the tailwind needed by U.S. exporters fighting multiple tariff battles (source: BTN Research).

U.S. and Chinese trade teams meet in Japan early this week, setting the stage for a face-to-face dialog between President Trump and Chinese President Xi Jinping late in the week. The White House’s threat from early May 2019 to increase tariffs from 10% to 25% on an additional $325 billion of Chinese imports is Washington’s leverage in the negotiations that will take place in Osaka (source: White House).

Notable Numbers for the Week:

NOT AS MUCH – China’s ownership of Treasury securities peaked at $1.20 trillion in August 2017 but has dropped 7.4% to $1.11 trillion as of April 2019 (source: Treasury Department).

MAYBE NEXT TIME – The Fed’s fourth meeting of 2019 ended last Wednesday with no change in short-term interest rates. The Fed last cut interest rates on 12/16/08 or 10 1⁄2 years ago (source: Federal Reserve).

AT RISK OF A TUMBLE? – The four most overvalued housing markets in the world today are Hong Kong, Munich, Toronto, and Vancouver (source: UBS Global Real Estate Bubble Index).

JULY FOURTH – When the Continental Congress approved the Declaration of Independence on 7/04/1776, the population of the 13 colonies was 2.5 million, equal to the population of Houston today (source: Census Bureau).

This material does not constitute a recommendation to engage in or refrain from a particular course of action. The information within has not been tailored for any individual. The opinions expressed herein are those of Michael A. Higley as of the date of writing and are subject to change. MML Investors Services, LLC (MMLIS) provides this article for informational purposes, and does not make any representations as to the accuracy or effectiveness of its content or recommendations. Mr. Higley is not an employee of MMLIS and any comments, opinions or facts listed are those of Mr. Higley.

This commentary is brought to you courtesy of MML Investors Services, LLC (Member FINRA, Member SIPC). Past performance isn’t indicative of future performance. An index is unmanaged and one cannot invest directly in an index. Material discussed is meant for informational purposes only and it is not to be construed as specific tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, it is not guaranteed. Please note that individual situations can vary, therefore, the information should be relied upon when coordinated with individual professional advice. Clients must rely upon his or her own professional advisor before making decisions with respect to these matters.

This article may include forward-looking statements that are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. CRN202006-249948