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Update 05/06/19 at 7:55 a.m: Yesterday, President Trump threatened to hit China with more tariffs, potentially escalating the trade war between the countries. Markets have responded with a frantic ‘risk-off’ trade that have sent stocks lower globally. U.S. stocks are set to open 1.5% to 2% lower, and local stocks in China were down 5.6% on the news. Meanwhile, in the flight-to-safety trade, bonds are up and yields down, with the 10-year trading 5 basis points lower at 2.48%. The bottom line—markets tend to respond poorly to unexpected news. Investors were caught completely off-guard by this news, sending stocks temporarily lower.

Last week: Global equities posted a modest positive return for the week. The S&P 500 index was up 0.2% for the week, and both international developed and emerging markets posted positive returns. Positive economic data drove U.S. markets higher on Friday, as U.S. unemployment fell to a 49-year low of 3.6%, and the U.S. economy added 263,000 jobs, well ahead of the 190,000 expected. Inflation rose 1.6% year-over-year, and remains below the Federal Reserve’s target rate of 2.0%. Interest rates were slightly higher for the week, with the 2-year and 10-year closing out the week at 2.34% and 2.53% respectively.

This week: Markets will be focused on the U.S.-China trade situation. Chinese Vice Premier Liu He was scheduled to be in Washington D.C. on Wednesday for the final stages of trade talks. China could cancel this trip, or some other solution may be reached before the new round of tariffs would be potentially implemented this Friday. Earnings continue this week, and key economic data will be reported on Wednesday (producer price index) and Thursday (consumer price index) that should give markets further clues to productivity and inflation.

Sources: Goldman Sachs Asset Management, Bloomberg
Week Ending 05/03/19
*Data is lagged by 1 day

This communication is for informational purposes only. It is not intended as investment advice or an offer or solicitation for the purchase or sale of any financial instrument.

Indices are unmanaged, represent past performance, do not incur fees or expenses, and cannot be invested into directly. Past performance is no guarantee of future results.

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