We are bringing our recommended domestic equity allocation back to market weight. Stocks have had quite a run this year, with the S&P 500 Index up 12% year to date and 19% since the December 24 lows. The index now sits just 5% below record highs set on September 20, 2018. Given this move in stocks, coupled with a slightly weaker economic and corporate profit outlook, we believe it is prudent to readjust our recommended domestic equity allocation back to market weight. See today’s blog on lplresearch.com and our latest Weekly Market Commentary due out later today for details.
March madness for yields. The NCAA tournament is off to a crazy start, but action in U.S. rates has been arguably crazier. The 10-year Treasury yield dropped through the end of the week, briefly falling below the 3-month yield intraday on Friday for the first time since August 2007. Yield curve inversion (or short-term rates falling below long-term rates) can be an ominous signal for the economy, as it’s preceded each of the nine recessions going back to 1955. We’ll outline our thoughts on the yield curve’s signals for the U.S. economy in this week’s Weekly Economic Commentary.
German business climate upbeat following Friday’s disappointing PMIs. The German Ifo Business Climate Index, a survey of roughly 7k firms, topped consensus estimates and prior month readings in both the current conditions and future expectations components. The data follow a string of flash PMIreports on Friday out of Europe, as well as the U.S., that painted a decidedly downbeat picture of the global economic landscape, spurring a broad selloff in stocks and an inversion at several key points in the Treasury yield curve (see above). It’s important to note that while the U.S. data showed a deceleration in business activity, both the manufacturing and services sectors remain in expansionary territory.
AG Report finds no evidence of collusion with Russia. In a letter to Congress the U.S. Attorney General (AG) said Special Council Muller’s report found no evidence of collusion between Russia and President Trump’s campaign team. Still, top democrats continue the call for the report to be made public after Muller failed to reach a conclusion as to whether the president obstructed justice, instead concluding there was insufficient evidence to bring charges. Market reaction was muted given already low expectations for impeachment or other significant consequence.
Week ahead. Two closely watched sentiment reports, including the University of Michigan survey, headline the U.S. docket. Abroad, Europe is gearing up for another vote in the U.K. Parliament that will help determine the extent of a delay (if any) beyond the March 29 Brexit deadline. Asia’s calendar is somewhat quiet outside of Japan, which gets inflation, retail sales, and unemployment reports. Track these and other important events on our Weekly Global Economic & Policy Calendar.
- Housing Starts (MoM, Feb)
- S&P CoreLogic Case-Shiller Home Price Index (MoM, Jan)
- Conference Board Consumer Confidence Index (Mar)
- China Industrial Profits (Feb)
- Trade Balance (Jan)
- GDP Report (Third Revision, QoQ Q4 2018)
- Initial Jobless Claims (March 23)
- Pending Home Sales (MoM, Feb)
- Eurozone Economic Confidence Index (Mar)
- Germany CPI Report (Mar)
- Japan Jobless Rate (Feb)
- Japan Tokyo CPI Report (Mar)
- Japan Industrial Production (Preliminary Feb)
- Japan Retail Sales (Preliminary Feb)
- Core PCE (MoM Jan)
- New Home Sales (MoM Feb)
- University of Michigan Sentiment Index (Mar)
- Germany Unemployment Claims Rate (Mar)
- UK GDP Report (Q4 2018)
- Eurozone CPI Report (Mar)
- Canada GDP Report (Jan)
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