Telemus Weekly Market Review August 26th - August 30th, 2019

August 26 – August 30 Week in Review

The markets returned to rally mode last week, snapping a four week losing streak as the market turned more optimistic on trade dealings with China. The S&P 500 rose 2.8%, the Dow Jones Industrial Average increased 3.0%, the Nasdaq Composite gained 2.7%, and the Russell 2000 rose 2.4%.

All 11 S&P 500 sectors finished higher with gains ranging from 1.8% for the utilities sector to 3.6% for the industrials sector. Trade sensitive areas like the Dow Jones Transportation Average and Philadelphia Semiconductor Index outperformed the broader market.

Prior to Monday's open, those results looked less likely. On Sunday, futures extended the prior Friday's sell off after President Trump responded to Chinese retaliatory tariffs by increasing the tariff rates on $525 billion of Chinese imports. That negative reaction was short lived, however, after President Trump said China called top U.S. negotiators to express interest in restarting trade talks, which China has denied multiple times.

The market, which had spent most of August focused on trade uncertainty, recessionary fears, and volatility, latched onto President Trump’s comments as an excuse to rebound. The week's trade inspired rally strengthened further after China said it wasn't immediately looking to retaliate against the latest tariff increases and repeated its willingness to resolve their dispute through "calm" negotiations.

Economic data last week showed the U.S. consumer, whose spending accounts for approximately 70% of GDP, to remain in good standing. Personal spending increased better than expected in July, and consumer spending growth was upwardly revised for the second quarter. The trade dispute, however, contributed to a downward revision to consumer sentiment for August, threatening to potentially temper discretionary spending activity.

The U.S. Treasury market was more subdued last week, but yields still finished lower. The 2 year yield declined three basis points to 1.50%, and the 10 year yield declined two basis points to 1.51%.

In other markets the U.S. Dollar Index advanced 1.2% to 98.81. WTI crude rose 1.7% to $55.06 a barrel despite falling on Friday after reports emerged that Russian Energy Minister Alexander Novak said Russia’s oil output cuts in August will be slightly smaller those agreed to under the deal between OPEC and non-OPEC producers.

September 2 – September 6 Economic Calendar