Schwab market perspective storm clouds building charles schwab escoliosis toracica

• of course, past performance is no guarantee of future results, but importantly, the ranges show that there is little consistency historically in escoliosis toracica terms of recessions’ timing or stock market performance in the aftermath of inversions escoliosis toracica in the yield curve.

Various pundits have dismissed both yield curves’ inversions this time around, citing the unique circumstance around why the curve inverted this escoliosis toracica year. Being mindful of the daring use of the phrase “it’s different this time,” the reality is that every cycle is unique in nature. This time around, the phenomenon of $17 trillion of negative-yielding global debt ( wall street journal) is certainly novel—and has undoubtedly led to significant safe-haven/higher-yielding purchases of longer-term treasury securities. As such, unlike most past episodes, the curve inverted this time because long yields fell below escoliosis toracica shorter-term yields vs. The fed raising short-term rates above long-term yields. That said, an inverted yield curve, when persistent (and regardless of why/how it inverted), does crimp or eliminate the spread banks can earn by escoliosis toracica borrowing short and lending long—typically constraining credit availability, a common precursor to recessions. Trade tensions continue to mount

The trade picture has shown few signs of improvement, as global manufacturing continues to weaken and myriad manufacturers continue escoliosis toracica to express uncertainty and are holding off on capital spending escoliosis toracica due to the trade dispute between china and the united escoliosis toracica states.

Due to the latest tariff escalations; and limited incentive for either side to compromise at this escoliosis toracica stage, we see little prospect of a resolution in the near escoliosis toracica future. Barring some minor positive developments, the general rhetoric over the past couple of months has escoliosis toracica shown no evidence of a conciliatory tone. The tit for tat continues, and the longer the dispute and escalations continue, the more damage it is likely to do to corporate escoliosis toracica animal spirits and capital spending intentions. The prospective risk is that manufacturing’s weakness starts to bleed into the consumer/services side of the economy. This may already be underway, with the latest services purchasing managers index (PMI) from markit falling to 50.9 (which is barely above the 50 mark denoting expansion). The slide coincided with a weaker manufacturing reading, which did dip to slightly below the 50 line. This weakness into services could be exacerbated by the fact escoliosis toracica that the next two rounds of tariffs on chinese imports escoliosis toracica are a direct hit to consumer goods. The sunny sky

For now, the U.S. Consumer is chugging along. Retail sales in july surprised to the upside with a escoliosis toracica robust reading of 0.7% month-over-month while, excluding the more volatile autos and gas components, sales increased 0.9% month/month and 4.2% year/year. Consumer confidence remains solid due to wages trending higher and escoliosis toracica jobless claims sitting at historically-low levels.

For now, the fed appears to be more focused on the consumer’s strength in holding up the economy. The july federal open market committee meeting (FOMC) minutes reiterated what fed chairman jerome powell noted immediately following escoliosis toracica the FOMC meeting last month—that the july rate cut was a “mid-cycle adjustment” rather than a “pre-set course” for an easing cycle. Yet, despite that, investors are still pricing in at least two more cuts escoliosis toracica this year. The divergence between these expectations and the fed’s signaling will have to be resolved at some point, and market volatility could increase along with convergence. Good news on trade (for a change)

Though the back-and-forth between the united states and china has commanded nearly escoliosis toracica all the attention, president trump and japanese prime minister abe worked to find escoliosis toracica common ground while at the group of 7 (G-7) summit in france. In fact, president trump stated that, “we’ve agreed to every point.” japan is the third largest economy in the world, behind the united states and china; and agreed last week to a trade deal that would escoliosis toracica allow more agricultural exports from the united states, and avoid new tariffs on japanese cars exported to the escoliosis toracica united states.

Lost in the escalating trade tensions with china is the escoliosis toracica fact that the united states now has trade deals signed escoliosis toracica or pending with japan, south korea, canada and mexico—making up four of the united states’ top seven trading partners—accounting for a combined 60% of U.S. Trade.

Nevertheless, the U.S.-japan trade deal is good news and highlights a potential escoliosis toracica bright spot in the trade malaise. Since the latest round of tariffs between the united states escoliosis toracica and china was announced on august 1, japanese stocks have outperformed U.S. Stocks. The MSCI japan index slid -2.0% while the S&P 500 index fell -3.7% from july 31 through august 27 (measured in U.S. Dollars).

A trade deal may not be the only reason for escoliosis toracica japan’s outperformance. Japan’s manufacturing sector is showing signs of stabilization, based on the country’s PMI, which bottomed in february. Other positive news included machine tool orders jumping 9% in july and a positive economic surprise index (citigroup economic surprise index, —indicating economic data has been exceeding economists’ expectations. Yet, japan faces some headwinds, which include an increase in its value-added tax (VAT) in october from 8% to 10%; and a trade skirmish with south korea, where the two countries have dropped each other as favored escoliosis toracica trading partners. Japanese stocks’ outperformance demonstrates the potential for some countries to provide shelter escoliosis toracica from the U.S.-china trade storm and highlights value of holding diversified portfolios. So what?

While manufacturing continues to weaken and the U.S.-china trade dispute shows no sign of a resolution, the U.S. Consumer continues to power the economy thanks to positive wage escoliosis toracica growth and a tight labor market. However, it’s prudent to be prepared for more bouts of volatility, and investors should make sure they are keeping a diversified escoliosis toracica portfolio with equity exposure equal to their risk tolerance. Within U.S. Stocks, we continue to favor large cap stocks over small caps; while recommending a fairly defensive sector positioning, with emphasis on health care, utilities, and staples during market rebounds (for more detail see drifting toward defensives). We don’t recommend trying to trade around short-term moves, but rather focusing on the long-term, remaining disciplined, and using bouts of volatility as opportunities to rebalance.

The information provided here is for general informational purposes only escoliosis toracica and should not be considered an individualized recommendation or personalized escoliosis toracica investment advice. The investment strategies mentioned here may not be suitable for escoliosis toracica everyone. Each investor needs to review an investment strategy for his escoliosis toracica or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice escoliosis toracica in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is obtained from escoliosis toracica what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. This content was created as of the specific date indicated escoliosis toracica and reflects the author’s views as of that date. Supporting documentation for any claims or statistical information is available escoliosis toracica upon request.

Diversification and rebalancing of a portfolio cannot assure a profit escoliosis toracica or protect against a loss in any given market environment. Rebalancing may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events may be created that may affect your tax escoliosis toracica liability

Past performance is no guarantee of future results. Forecasts contained herein are for illustrative purposes only, may be based upon proprietary research and are developed through escoliosis toracica analysis of historical public data. The policy analysis provided does not constitute and should not escoliosis toracica be interpreted as an endorsement of any political party.

Markit manufacturing purchasing managers index (PMI) is an indicator of the economic health of the manufacturing escoliosis toracica sector. The PMI index includes the major indicators of: new orders, inventory levels, production, supplier deliveries and the employment environment.

The citigroup economic surprise indices are objective and quantitative measures escoliosis toracica of economic news. They are defined as weighted historical standard deviations of data escoliosis toracica surprises (actual releases vs bloomberg survey median). A positive reading of the economic surprise index suggests that escoliosis toracica economic releases have on balance [been] beating consensus. The indices are calculated daily in a rolling three-month window. The weights of economic indicators are derived from relative high-frequency spot FX impacts of 1 standard deviation data surprises. The indices also employ a time decay function to replicate escoliosis toracica the limited memory of markets.

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