Market Update: July 2019

Investment Advisory Services Featured Market Data

Stocks and Treasuries Diverge

Stock and bond markets are expressing divergent views of the future. Typically, stock prices and bond yields rise together. Bond yields began to decline in the 4th quarter of 2018 and stocks declined as expected. However, stocks recovered in late December while bond yields have continued to fall. While we believe the fixed income market is likely ahead of the Fed, what’s more concerning is the impact, or lack thereof, the yield curve has had equity valuations. Traditional correlations are broken, as risk markets have rallied right alongside their US Treasury risk free counterpart. We expect continued market volatility.

Source: Bloomberg, Prudent Man Advisors

Investment Advisory Services Recent News

Federal Reserve May Act Preemptively

Speaking at an event in New York on June 25, Federal Reserve Chairman Powell said that many Fed officials believe the case for lower rates “has strengthened.” He said Fed officials had believed much of the recent inflation weakness would be temporary, but it now appears that the undershoot “may be more persistent.” Given relatively low interest rates, there is less room to cut rates and in this world of lower rates, Powell said it may be better for central banks to “act pre-emptively” and cut interest rates earlier than they typically might.

Source: S&P Global Market Intelligence

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