Weekly Market Update

Weekly Market Update

September 03, 2019

Brexit volatility. Global stocks are modestly lower this morning, declining after their best week since June (according to the MSCI All-Country World Index) amid a wave of Brexit headlines. U.K. Prime Minister Boris Johnson threatened to hold a general election on whether or not the United Kingdom should leave the European Union (“Brexit“) if Parliament votes to delay the October 31 deadline. The economic implications of Brexit are tough to predict, and they could be more severe if the United Kingdom exits the European Union without an agreement in place. However, we don’t expect a Brexit of any kind to materially harm the U.S. economic outlook.

Taking a breather. U.S. stocks are taking a breather after a strong rebound to close out August. The S&P 500 Index reversed course last week, rising 2.8% through Friday’s close to avoid its first five-week slide since 2011. Markets have been especially sensitive to trade and geopolitical headlines over the past week, so more volatility may be ahead with several global issues still unresolved. September has also historically been a rough month for U.S. stocks, as we explained in an LPL Research blog post on August 30.

Major hurricanes and the stock market. First and foremost, our thoughts are with all of those that have been impacted by Hurricane Dorian and all those that are still in its path. Many have asked us what stocks tend to do after a category four or five hurricane hits the United States. This question unfortunately seems to come up more than anyone would like (after multiple major hurricanes in the past few years). Because of this, we’re highlighting major hurricanes’ impacts on U.S. stocks in today’s LPL Research blog post.

Treasuries and the yield curve. We recently reduced our year-end forecast range for the 10-year U.S. Treasury yield from 2.5-2.75% to 1.75-2%. This significant reduction reflects what we consider the many somewhat curious aspects of the domestic and global macroeconomic environments. In today’s Weekly Market Commentary: U.S. Treasuries and the Yield Curve, we outline the biggest drivers for  Treasury yields and U.S. fixed income going forward, and explain why a shift in the global environment has led to a 10-year yield near record-low levels.

Weekly economic calendar. In the week ahead, investors will be watching for August data for the Institute for Supply Management’s Purchasing Managers’ Index (PMI), a gauge of U.S. manufacturing health. Investors will get more details on the U.S. labor market when the August jobs report is released on September 6. Overseas, investors are sorting through final Markit PMI data for August released this morning, and the first revision of second-quarter Eurozone GDP will come out on September 6.



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