TGIF – Monday Morning Market Memo – August 19, 2019

Good morning,

Trading last week can aptly be summarized (twice) with the acronym TGIF. First, Thank Goodness It’s Friday – when the Dow Jones Industrial Average rose over 300 points to bring us into the weekend on a positive note. Second, Thank Goodness It’s Finished, as a stressful and volatile week came to an end (the Dow plunged 800 points, or 3% on Wednesday, its biggest one day fall of the year). So, even with Friday’s gains, the major stock market averages still posted weekly losses. The Dow Jones lost 1.5%, the NASDAQ Composite dropped .8%, and the Standard & Poor’s 500 Index fell just over 1%.

Volatility last week was fueled by mixed macroeconomic data, headlines regarding the US/China trade war, and an inversion of the yield curve (the biggest factor behind last week’s decline). On Wednesday the yield on the 10-year Treasury bond fell below the yield on the 2-year Treasury, marking the first time in over a decade this yield curve inverted. Remember that longer term bonds normally yield more than shorter term bonds to compensate investors for tying up their money for a longer time. An inverted yield curve has historically been an accurate predictor of a recession. Interestingly though, the market has in the past performed well for months after an inversion. As always though, just because things have happened certain ways in the past does not mean they will necessarily happen that way in the future!

Looking to the week ahead, we’ll get a fresh batch of earnings reports in what we call “retail week”, with companies including TJX, Home Depot, Kohl’s, Children’s Place, Target, Nordstrom, Lowe’s, Dick’s Sporting Goods, Urban Outfitters, and Foot Locker included in the list of retailers scheduled to report. Away from retailers, notable companies reporting include Baidu, Toll Brothers, Medtronic, Hormel Foods, and Also, in the week ahead we’ll hear from Fed Chair Powell, who is scheduled to speak Friday at the annual Jackson Hole Economic Symposium in Wyoming.

Continuing the trend from last week’s close, the market opened fairly strong this morning, as bond yields are rising, reducing fears of recession. As always, please contact us with any questions you may have or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC