Thrive Weekly Economic Update – September 30th, 2019

OUR NJ OFFICE IS RELOCATING

This week, Thrive’s Mt. Laurel, NJ office will be relocating to Cherry Hill, NJ! We are very excited and looking forward to the opportunity to continue serving our local communities.

 

U.S. MARKETS DOWN AS IMPEACHMENT AND CHINA WORRIES DOMINATE THE NEWS

  • The major U.S. stock indices retreated this week, as investors appeared unnerved by trade and political noise
  • The DJIA dropped only 0.4%, but the broader S&P 500 pulled back 1% and NASDAQ declined more than 2%
  • The smaller–cap Russell 2000 Index retreated significantly, losing 2.5% on the week
  • Early in the week, the markets appeared unnerved as news of an impeachment inquiry on President Trump started to dominate the news
  • Then after news of an impeachment inquiry, news that the White House was considering restricting U.S. flows into China and delisting Chinese companies from U.S. stock exchanges conspired to cause the markets to react negatively as the worry that a trade deal would not be reached soon increased
  • Of the S&P 500 sectors, Health Care and Energy were the biggest losers, declining 3% and 2.6% on the week
  • Energy was hurt by the decline in oil prices, which dropped 3.8% this week to $55.90/barrel
  • There were three S&P 500 sectors that moved up, including Consumer Staples (+1.2%), Utilities (+1.3%), and Real Estate (+0.2%)
  • The 2–year Treasury yield declined to 1.65% and the 10–year Treasury yield declined to 1.68%
  • The U.S. Dollar Index advanced 0.6% to 99.10

WEEKLY MARKET PERFORMANCE

*Source: Bonds represented by the Bloomberg Barclays US Aggregate Bond TR USD. This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

THOMAS COOK DECLARES BANKRUPTCY

Early in the morning of Saturday, September 14th, there were drone attacks on two major oil facilities in Saudi Arabia. The attacks knocked out more than 5% of the global oil supply as it crippledThomas Cook, the 178-year–old British travel company, declared bankruptcy on Monday, suspending operations and stranding 600,000 tourists around the world. The travel company employed approximately 20,000 people, operated its own airline, and was listed on both the London Stock Exchange and the Frankfurt Stock Exchange.

 

GM STRIKE CONTINUES PAST WEEK TWO

For the past two weeks, approximately 46,000 General Motors workers remained on strike, effectively halting GM’s production in the United States. The last GM strike happened in 2007, a full year before the U.S. government bailed out the auto industry and before the global financial crisis was at its worst.

Reports that negotiators have been talking into the wee hours of the morning as recently as this past Friday could be a signal that a tentative agreement is soon reached. But the strike is already the longest strike faced by GM since 1970.

SMALL CAP STOCKS RETREAT

The U.S. stock indices were all painted red this week and for the second consecutive week, smaller–caps underperformed their larger–cap counterparts. The smaller–cap Russell 2000 Index retreated 2.5% on the week, but is still up almost 13% on the year. The larger–cap S&P 500, on the other hand, declined 1% this week, but is up about 18% on the year.

NEWS ABOUT CHINA TRADE CLEAR AS MUD

Traders this week were bombarded with news about the U.S. and China trade dispute and the news was as clear as mud.

  • Early in the week, investors cheered Treasury Secretary Steven Mnuchin’s announcement that trade talks with China were set to resume in early October and when China announced new waivers for imports of U.S. soybeans.
  • Within about 24 hours, however, President Trump told the United Nations of China’s “theft of intellectual property and also trade secrets on a grand scale” while pledging that he would “not accept a bad deal.”
  • Then about 24 hours after that, on Wednesday, President Trump told reporters that a truce with China might happen “sooner than you think.”
  • Then on Friday, traders grimaced when news trickled out that the White House was considering restricting U.S. investment in China and forcing U.S. exchanges to delist shares of Chinese companies. Not surprisingly, shares in many Chinese companies dropped sharply.

IPOs STRUGGLE

This week seemed to support the notion that the IPO market was more than soft, especially for those unicorn IPOs, which are companies with private valuations of over $1 billion.

Shares in fitness equipment–player Peloton suffered the second–biggest drop of the year of any IPO on the day of its launch. Then to end the week, sports–company Endeavor yanked its IPO, as did office–hosting WeWork the week before, citing the need to wait until conditions were more favorable.

ECONOMIC DATA – GLASS HALF FULL OR HALF EMPTY?

Investors received a lot of economic data this week and the results really depend on your view of the water glass.

Glass half–empty investors are worried about:

  • The Conference Board Consumer Confidence Index decreased in September, following a decline in August
  • The Conference Board’s researchers cited fears over rising trade tensions and tariffs
  • Personal spending rose only 0.1% in August, the slowest pace since February
  • Jobless claims inched higher for the third week in a row

Glass half–full investors are encouraged by:

  • The annual pace of new home sales for August was one of the highest readings since October 2007
  • Pending home sales rebounded 1.6%
  • Personal incomes rose a healthy 0.4%

 

SOURCES

conferenceboard.orgfactset.comdol.govbea.govnar.realtor.comstandardandpoors.comnyse.commsci.comnasdaq.comdowjones.commorningstar.comedwardjones.combloomberg.com


 

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