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Weekly Commentary

NDS Weekly Commentary 8.19.19 – Volatility Continues

Stock markets worldwide were lower last week as weak economic data out of China and Germany rattled investors. Chinese industrial production slowed to 4.8% year-over-year, the weakest since 2002, while German GDP contracted -0.1% for the 2nd quarter of 2019. Trade worries continued to hang over the markets as China and US exchanged threats. However, hidden behind all of the negative global headlines were July retail sales that rose a healthy 0.7% month-over-month and new home permits were up 8.4% month-over-month and now up 1.5% year-over-year. It’s important to remember consumption is two-thirds of U.S. GDP and retail sales are 43% of consumption.

Despite an 800 point selloff in the DJIA on Wednesday, markets bounced back and finished the week modestly lower. For the week, the DJIA, the S&P 500, and the NASDAQ were down -1.4%, -0.9% and –0.9%, respectively. Developed international and emerging markets declined -1.5% and -1.0%. The best performing sectors for the week were the more defensive (albeit overvalued) consumer staples, utilities, and real estate.

The increased volatility has benefited fixed income markets as investors sought shelter in U.S. Treasury securities. Interest rates continued to fall for the week. During the week, the 30 year U.S. Treasury bond briefly dipped below 2.0%. At one point during the week, the yield on the 2 year and 10 year U.S. Treasury briefly inverted raising recessionary concerns. However, by the end of the week the 10 year ended at 1.55% down from 1.74% and the 2year was at 1.48%. While recessionary fears are rising we do not anticipate a recession in the near-term.

This week is a slow week for economic news with only reports on existing home sales, new home sales and preliminary mfg. PMI.

We would remind investors to maintain a well-diversified portfolio to help weather periods of market volatility.

“Failure will never overtake me if my determination to succeed is strong enough.”Og Mandino

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