Market Snapshot August 22, 2019
Happy Thursday A.M.,
Today is all about 1) the inverted yield curve and 2) Mr. Powell’s speech at tomorrow’s Jackson Hole Banking Conference. Stocks and bonds are flat on the day as markets are on a bit of a pause. It feels like bonds are coiled ready to strike and are just waiting for Mr. Powell to give the green light tomorrow. If he mentions weakening economies, potential for a recession and future rate reductions, we could see rates move lower. The markets are already expecting this as they continue to show with the inverted yield curve. I know the pundits say that the inverted yield curve is not foretelling in today’s market but I don’t buy it. It has been a precursor for a recession over the last 60 years and our market has changed substantially over that time. That the 2-yr and 10-yr yields are inverted is not a positive for our economy. You should not get a better return on a fixed investment over a shorter period of time. I don’t think a recession with damage housing or real estate prices and could actually work as a catalyst for growth but nonetheless, a recession is in the forecast. If Mr. Powell stays defiant of Mr. Trump (which he should, but not to the disadvantage of the consumer and markets) and refuses to offer any insight on future rate reductions, I think rates could worsen.
Unemployment claims were a tad better than expected and the Markit Manufacturing Index dropped to lowest since September 2009. The 49.9 missed 50.5 forecast and fell below 50 which indicates the manufacturing sector is contracting. New orders decreased to 49.5, lowest since August 2009. Markit Services Index dropped to 3-month low at 50.9. The Composite Index was 50.9, also 3-month low.
Make today great!