Market Update Tuesday June 4, 2019 Real E Estate i e is t the t - - PowerPoint PPT Presentation
Market Update Tuesday June 4, 2019 Real E Estate i e is t the t he top p performing asset o over ver t the p he past 12 months sonly t two a assets s (rea eal e estate & e & bond nds) s) h have e posi sitive r
Tuesday June 4, 2019
Real E Estate i e is t the t he top p performing asset o
ver t the p he past 12 months… s…only t two a assets s (rea eal e estate & e & bond nds) s) h have e posi sitive r e ret eturns s over ver p past 12 months. Many sub a ub asset classes sses like s e small cap, p, i inter ernational, a and e nd emerging m markets s are o e off t thei heir highs by s by greater t than an 9 9%.
Yiel elds o s on US Trea easu suries es h have e collapsed ed a as inves estors f fears s over ver t trade e wars h s have e caused used t them hem t to l lower er risk sk i in t thei heir portfolios. The 3 he 3 year U US Trea easu sury y yiel eld dropped ed by by a almost 50 basi sis p s points s (0.5%) 5%) o
ver t the p he past week ek.
Consum nsumer ers are s e spen ending ng l less… ss…this s is a a conc ncer ern. Consum nsumer er spen ending m makes es up o p over ver 70% of t the he US G GDP s so w when en w we s see a sustained ed s slowdo down i it m may i indi ndicate a e an i issue. sue. It i is still g growing, but a at a a much slower rate.
Unem employmen ent r rate s e still remains ve very low!
US Personal l Income Gr Growth h has d declin lined, b but s still ll r remain ins healt lthy. It can b be v viewed a as a laggin ging i indic icator i in the sense that b busin inesses p pay m more w when t the f future looks brig ight. When uncertain inty ( (trade w wars) i increases, b busin inesses w will f l find i it diffic icult lt to plan f for the f future and when t this is happens i it will b l be unwillin illing t g to pay m more t to emplo loyees.
Durable g e goods ds o
ders s are a e an impo portant i ind ndicator o
uture e e economic g growth as these g hese goods h ds have l e layer ered, d, c complex m manu nufacturing proces esses w ses which add t dd to economic growth. The 6 he 6 month ave verage p e pea eaked ed just shy o
1.0% t 0% to t the c he cur urren ent - 0.2%. %....again a an i n ind ndicator w we n need eed to m moni nitor c closel sely.
Recent l lackluster er e economic n num umber ers s point to a significant s slowdown curren ently i in n the U he US economy. So f far the L he LEI i ind ndicates a es a slowing, but ut h healthy econ
Equity ty M Market t Tops – Is thi his t the U he US top?
The he US i inflation rate i e is s struggling t to s stay a at the he Feder deral Reser erve’ e’s t s target rate o e of 2%. It c currently i is 1.5% w % which means s the F he Fed ed will b bec ecome m e more e accom
ive to
ic grow
in t the n near f future.
Liqui uidi dity(1
(1) matter
ers t s to f fina nancial m markets.
he S&P 5 500 h has s struggled sinc nce e early 2 2018 a 8 about the he same e time t e tha hat f fina nancial market l liqu quidity g growth tur urned ed negative. e. It w will be d difficult f for a a sustained ed r rally i in n equi quities es unl nless ess it t tur urns posi sitive.
his m may a affec ect s smaller er companies m more t e tha han l larger er o
es whi hich have e acces ess t s to i inter ernational fina nancing o
ptions s (i.e.
Europe, e, Japa pan, et etc.)
(1) Liquidity is the ability of assets to be traded easily at the current price. It also indicates the level of cash/cash equivalents available for financial markets investment.
Conclusions
To summarize:
slower pace
businesses and investors at this point
economic data slows more significantly
Based on recent trends, the US economy is on a slowing trajectory with a few warning signs. In our portfolios, we remain cautious based on recent higher equity market volatility and few near term earnings drivers. In fixed income, we remain invested in short duration, higher rated issues and ETFs. We remain neutral on real assets.
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