Trade tensions continued to dominate US Equity Markets last week, as the rhetoric between the US and China appeared to increase while President Trump surprised markets by announcing a 5% tariff on Mexican imports beginning June 10th unless Mexico helps more with the inflow of immigrants to the US from its borders. As a result, investors increasingly fear slower economic growth, if not a forthcoming recession. The S&P 500 dropped for the sixth consecutive week, down 2.6%, bringing gains for the year down to 9.8%. The Nasdaq declined 2.4% for the week and is now up 12.3% for the year, while the Russell 2000 (small-cap stocks) fell 2.4% for the week to bring its gains for the year to 9.6%.
Global equity markets were mixed last week, as trade fears hurt Developed Markets while Emerging Markets rallied amid strength in Latin America. Developed Markets fell 1.9% for the week to bring gains for the year to 6.3%. Emerging Markets rose on optimism in Latin America following the agreement between the US, Mexico, and Canada, up 1.2% for the week. For the year, Emerging Markets have increased 3.4%.
US interest rates hit 20-month lows last week thanks to rising investor concerns about global economic growth. The yield on the US 10-Year Treasury fell to 2.13% from 2.33% last week, and dropped a sharp 37 basis points for the month of May.
Of Interest to Us
Amidst the rising trade tensions and negative headlines, US economic data remain strong. Economic growth for the first quarter 2019 was revised to a still-strong 3.1% (from 3.2%), Consumer Confidence for May hit its highest levels of the year, and measures of US manufacturing activity increased from April and remain in expansion territory. The market is anticipating slowing growth, and there are increasing calls among pundits that an economic recession is forthcoming, yet the data thus far do not support that.
for the week ending 5/31/2019
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