Markets “In a Nutshell” for September 17, 2019
Investment Week at a Glance
Stocks finished up for the week. The Dow Jones Industrial Average was up 1.58%, the S&P 500 rose 0.96%, the New York Stock Exchange Composite (2,000 stocks) rose 1.48% and the average investors index (Value Line Index) was up 4.08%. Foreign stocks (DJ Global ex U.S.) were up 1.90%. Bond prices were down for the week, pushing the yield on the 10-year U.S. Treasury up 35 basis points to end the week at 1.90%. (Data source: Wall Street Journal)
Interim Trade Deal Now Possible
The U.S. and China have begun talks on exempting certain products from tariffs and delaying future planned increases in a sudden reversal in trade sentiment from just a month ago. President Trump has also warmed to the possibility of an interim trade deal with China that caused a boost to stocks last weeks. This politically motivated shift in tactics to provide some stimulus ahead of next year’s election begs the question of if the U.S. trade team truly thinks it can get a deal in the short term, but regardless was welcome news for financial markets after months of escalations in tensions. (Barron’s)
Europe Cuts Rates & Restarts Quantitative Easing
The European Central Bank cut rates further into negative territory to a rate of -0.5% and has restarted the highly controversial quantitative easing program. This was the last meeting for the president of the bank, Mario Draghi, who is famous for his “do whatever it takes” attitude of using monetary policy to save Europe’s stagnant economy and financial ailing. Draghi admitted himself in his last speech on Wednesday that monetary policy could no longer be the only solution to propping up Europe and that individual countries would need to spend more on fiscal policy to bring Europe out of a looming recession. Likely incoming president, Christine Lagarde, will have her hands full dealing with the decision of whether to continue these controversial policies or to cut the life support keeping some of Europe afloat. (Barron’s)
Fed Likely to Follow With a Rate Cut
The Federal Reserve begins its two-day policy meeting where it is expected to cut interest rates for a second time. What the Fed signals it will likely do in the near future is, as always, the most important aspect of these meetings and this particular meeting is especially important, as it may signal whether we’re are entering a rate cutting cycle or just a “mid-cycle” adjustment as Fed president Jerome Powell stated last meeting. Tensions are high as the market still seems to be pricing in more rate cuts and President Trump has made it clear that he thinks rates should be much lower. (Barron’s)
Apple once again passed the $1 trillion market capitalization mark with a well-received product release. When was the last time it reached that level?
Answer below ….
Have a Great Week!