Improving economic data, supportive global central-bank policies, and optimism around trade all led stocks to advance near record highs. China announced that it would exempt some U.S. products from tariffs, and the U.S. responded with delaying the increase in some of the tariffs scheduled to take effect next month. These goodwill gestures from both sides sparked optimism that an interim trade agreement can be achieved. Notable market moves last week include a sizable rise in Treasury yields and the outperformance of cyclical sectors (financials, industrials, energy) over defensives (utilities, health care, staples). Another shift was the preference for stocks with depressed valuations over stocks that traditionally trade at higher price-to-earnings ratios, which have outperformed this year. While the timing of swings in the market's complexion and leadership rotation are hard to predict, well-diversified portfolios can provide exposure to future asset-class leaders and potentially smooth out the ride for investors.
Brexit 2.0 – The Next Spark?
We're not surprised by the stock market's rebound from the August pullback -- it's consistent with our ongoing view that equities will see more frequent bouts of volatility at this stage in the cycle, but that the fundamental backdrop is still supportive of an extension to this bull market. Cooler heads have prevailed in September, but the sparks that will ignite the aforementioned bouts of volatility have not been extinguished in our view.
Brexit 2.0 – More About Politics Than Portfolios
Craig Fehr, CFA
|Dow Jones Industrial Average||27,220||1.6%||16.7%|
|S&P 500 Index||3,007||1.0%||20.0%|
|10-yr Treasury Yield||1.90%||0.34%||-0.78%|
Source: Bloomberg, 09/13/19. *5-day performance ending Friday. Bonds represented by the iShares Core U.S. Aggregate Bond ETF. Past performance does not guarantee future results.
The Week Ahead
The Weekly Market Update is published every Friday, after U.S. markets close.
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