The stock market, as measured by the DJIA, has been in somewhat of a narrow trading range over the last few months – between roughly 27,200 on the high end and 25,500 on the low – as the positive news on the U.S. economy has been buffeted by the headline news on the trade war with China. A few positive data points that have influenced results have been the continued strong readings on U.S. employment and early signs of wage growth. On the negative side, we have seen positive but slowing GDP growth, and sluggishness in U.S. manufacturing.
The bond market continues to be impacted by presumed cuts in interest rates by the Federal Reserve, and it appears that the Fed will cut at least once more before the year’s end. Meanwhile, the 10-year bond continues to be well under 2%, and the yield curve is still somewhat flat. Internationally, there has been some recent talk about a global recession, as some of the 10-year paper of other major countries is actually trading at negative yields – crazy! The U.S. economy, on the other hand, has been far more resilient than other economies around the world, and the question is: Can it continue to grow when almost all others are not?
As of now, there seems to be little impact on stock and bond markets from U.S. political issues, although this should change as we approach the 2020 elections. As difficult as it may be to do so, investors will have to factor in potential election results into their prognostications. We will plan to implement our own strategy with respect to the forthcoming election over the next 6-9 months.
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