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Weekly Market Update for August 16, 2019

by Jared Plotz

The Dow was up on Friday, rising 306 points to close at 25,886. For the week, the Dow was down 1.5% (SP500 -1.0%) and year-to-date is now up 11.0% (SP500 +15.2%). The yield on the 10-year Treasury (an important interest-rate indicator) fell 20 basis points, closing at 1.54%.  The 30-year Treasury bond dipped below 2% for the first time ever.

The decline in long-term interest rates – while beneficial for excellent-credit consumers and businesses taking out loans – hurts most banks, and sends a strong chill through investors when the “curve” inverts. As a refresh for our readers, the curve is inverted when short-term rates (e.g. 2-yr Treasury) yield a premium to longer-term rates (e.g. 10-yr Treasury), which disincentives banks from lending and slows the economy. The curve inverted briefly intra-day on Wednesday and Thursday morning this week before reversing later in the week. While very few other economic indicators are flashing warning signs, a sustained inverted yield curve has most often been followed by a recession within 12-24 months. So it is a key barometer of investors.

US economic data was largely positive this week amidst the brewing geopolitical issues in a number of regions, with the protests in Hong Kong being the most visible. Inflation indicators were a tad better than expected this week, while retail sales for July strongly outperformed forecasts. Business confidence and manufacturing were also stronger while consumer confidence came in softer.

The price of crude oil rose 1% this week to $55 a barrel – up 21% YTD. Oil prices were pressured by a soft inventory report, but reacted positively to US efforts to put the kibosh on an oil tanker swap between the UK and Iran.  Energy equities trailed the commodity, with domestic producers down 4% and service providers declining 5%.

The market continues to be negatively influenced by the seesawing in trade talks with China. We expect volatility, which spiked this week, to continue to remain elevated in coming weeks even if markets were to move sideways.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss.


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