Challenging Market Environment

It’s been a challenging market recently. Retail sales have been good, the U.S. consumer continues to be the engine of growth, and jobless claims are at 60-year lows. The S&P 500 Index had its best start to a year since 1997—and yet the S&P has been down three weeks in a row!

Let’s Talk About Policy

Trade is the uncertainty in the equation. China’s data continues to be weak, and our stance remains that both the United States and China have so much to lose in a prolonged trade dispute. Although talks are scheduled for September, we thin

Trade tensions continue to weigh on China’s growth, creating added pressure to reach a trade deal with the United States.

Economic reports released last week provided further confirmation that the trade war is continuing to affect the Chinese economy. As shown in the LPL Chart of the Day, Industrial Production Weakening in China, U.S., China’s manufacturing increased just 4.8%, the slowest rate of growth in 17 years. Although that rate of manufacturing growth exceeds that of the United States, it represents a sharp slowdown for China.

Other data showed China’s retail sales grew 7.6% in

We are tweaking our 2019 forecasts to reflect increased risk to economic growth and corporate profits from the ongoing trade conflict between the United States and China. We are maintaining our year-end fair value target on the S&P 500 of 3,000 as lower interest rates and inflation support higher valuations.

Recession fears from the yield curve inversion offset the boost from the tariff delay. Trade fears swung around stocks last week before some tariffs were delayed August 13 to avoid impacting the holiday shopping season. On August 14, the first inversion of the 2-year/10-year Treasury yield curve since 2007 sparked recessio

Equities

Investors endured another volatile five-day stretch as the combination of trade uncertainty, plunging global bond yields, and conflicting messages between the United States and global economies further pressured stock prices. It may seem hard to believe that the S&P 500 Index achieved record levels just three weeks ago, but that speaks to the curious nature of the current market dynamics, along with the seasonal weakness typically associated with the Dog Days of Summer, as August and September historically deliver the weakest monthly returns for the equity markets.

Indeed, the current volatility presents many conc