by Connor Darrell CFA, Assistant Vice President – Head of Investments
Equity markets broke a four-week streak of losses last week, pushed higher by a cooling of trade rhetoric coming out of both the U.S. and China. Both sides confirmed that trade talks remain scheduled for September, and comments from the Chinese Ministry of Commerce suggested that China would not immediately retaliate against the most recent U.S. tariff increase. Bonds generated another week of positive returns as interest rates continued to slide lower. Bond yields have been trending downward for the entirety of 2019 as a result of softening global economic data and negative yielding rates in much of the developed world. The lack of positive yield available overseas has created a surplus of demand for U.S. treasuries and led to a significant increase in prices.
Despite some of the “warning” signals that have flashed in the bond market over the past several weeks, there remains reason for investors to be cautiously optimistic. The U.S. consumer remains very healthy at this point in time and looks poised to continue carrying the economy forward. Additionally, second quarter corporate earnings came in stronger than expected, with corporate margins holding up particularly well despite the wage pressures created by a tight labor market. All of this bodes well for the resiliency of the U.S. economy, and we continue to recommend that investors remain disciplined in the wake of increased volatility.