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2019 2nd Quarter Economic Update | Finance Speaks

July 12, 2019

 

As I have spoken about over the course of the past few market updates, we want to check in on my outlook on a recovery from last year’s negative returns across the markets.  So far this year, the S&P 500 is up over 18% for the year to date figures.  Please check out my Finance Speaks program on why your account returns may not have the same returns as the S&P 500.

However, the key market items we want to look at today are as follows:

Tariff increase on Chinese imports in May may have triggered the end of this year’s equity market recovery. While the stock market has since rebounded, the lasting impact can be seen in falling long-term government bond yields, the inverted U.S. yield curve, the slowdown in global trade and weak global manufacturing surveys. As a result, It will be interesting to see if the Federal Reserve will cut interest rates in both July and September.

These indicators do not necessarily raise concern with us, however, as I stated at the end of last quarter it tends to cause a lean our biases towards caution.

Not to bore you with over-hyped financial data, let me give you the jest of 3 areas I want to highlight.

FISCAL STIMULUS

Fading fiscal stimulus is likely to slow the U.S. economy relative to its breakneck pace away from 2018. However, let me reiterate, we’ve had an 18% YTD return for this year.  We can stop growth for this year and we are still is a good place.  Sometimes even the best athletes can use a breather.

MANUFACTURING CYCLE

Here is what I am closely watching and where my caution is centered.  Midway through 2019, the U.S. manufacturing cycle remains weak. In addition, the global manufacturing cycle has continued to decelerate, and at mid-year are approaching recessionary levels.  My promise to you is that we will continue to watch this area.

TRADE UNCERTAINTY

The trade war will continue for my life time and life times to come.  It’s a talking piece for current events and remember, when you are investing, well at least anyone I want to partner with; we’re in it for the long haul.  Give the news media something to chatter about.

So to wrap up, here are my concerns but remember that they can be overcome to avoid a market pull-back or even a recession.  I do raise some caution with regards to the inversion of the U.S. Treasury yield curve and the downtrend in business confidence indicators but look at the China stimulus, global central bank easing and a China-U.S. trade-war ceasefire which could set the scene for a rebound in the global economy later in the year.

It’s a fun and exciting time in my office.  But just remember, historically in the summer time, they markets take a break.  There is more volatility because investors tend to go on vacation.  Therefore, those that are left are either suffering from sleep deprivation or investor speculation.  Summer times produce “ifs” but the true growth period of the market begins historically in September.  So hang in there and let me know if you have any questions or need assistance with any financial matters.

Thank you to Russel Investments, Barons Magazine, Bloomberg, and MarketWatch.com for assisting us with the information and research materials needed to make this program possible.

For Finance Speaks, I’m Kyle Sadler, headed out until next time.  Be blessed and know that we are here for you.

 

 

 

 

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Precept Wealth Management
19506 Highway 59 N, Suite 315
Humble, TX 77338


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