August 2019
Market Update
(all values as of 03.29.2024)

Stock Indices:

Dow Jones 39,807
S&P 500 5,254
Nasdaq 16,379

Bond Sector Yields:

2 Yr Treasury 4.59%
10 Yr Treasury 4.20%
10 Yr Municipal 2.52%
High Yield 7.44%

YTD Market Returns:

Dow Jones 5.62%
S&P 500 10.16%
Nasdaq 9.11%
MSCI-Europe 4.60%
MSCI-Pacific 5.82%
MSCI-Emg Mkt 1.90%
US Agg Bond -0.78%
US Corp Bond -0.40%
US Gov’t Bond -0.72%

Commodity Prices:

Gold 2,254
Silver 25.10
Oil (WTI) 83.12


Dollar / Euro 1.08
Dollar / Pound 1.26
Yen / Dollar 151.35
Canadian /Dollar 0.73

Macro Overview

Trade tensions escalated as the U.S. announced a 10% tariff commencing September 1st on $300 billion of Chinese imports that haven’t yet been subject to any tariffs. The additional tariffs would essentially apply to nearly all imports from China. Another $250 billion in Chinese imports have already been subject to a 25% tariff for the past few months.

Trade data from the Commerce Department shows imports from China have declined 12.6% over the past year, yet imports from South Korea, Taiwan, and Vietnam rose 9.2% during the same period. Other Asian countries are becoming substitute exporters of goods to the U.S. as Chinese exports to the U.S. have been subject to increasing tariffs.

Analysts and economists believe that a continuing low interest rate environment will help to offset the impact of escalating tariffs, as the low cost to borrow for consumers minimizes some of the tariff costs passed along to consumers.

Stock indices climbed in July to reach new record levels, driven by indications that the Federal Reserve was on track for an imminent rate cut. Equity and bond markets continued to move higher following a strong June, propelled by improved earnings and gradual economic expansion.

The newly elected Prime Minister of the United Kingdom is positioning the country for departure from the EU, also known as Brexit, on October 31st. Britain’s exit from the EU has several other European countries closely monitoring how the exit will be orchestrated. The British currency, the pound, has fallen to its lowest levels against the euro since September 2017.

The Federal Reserve cut the Fed Funds rate on July 31st, making it the first rate cut since 2008. Markets pulled back as the Fed Chairman signaled that additional rate cuts were not expected to be ongoing. The rate reduction follows a series of gradual rate increases that began in 2015. The Fed Funds rate is a monetary policy tool used by the Federal Reserve to control the interest rate charged by banks for funds loaned amongst each other. It eventually affects consumer loans and mortgage rates as banks adjust to the modified Fed Funds environment.

Even as the 10-year Treasury yield fell below 2.00% in July, it is still offering a more attractive yield than most other developed country government bonds. Yields for 10-year government bonds in Germany and Japan yielded -0.44% and -0.16% respectively. Such negative yields mean that investors are basically paying the governments of Germany and Japan to hold on to their funds. The U.S. economy has thus far not participated in the international slowdown prevalent in other countries. Stimulus efforts by the central banks around the world have lowered rates to where $14 trillion of global bonds are generating negative yields.

The Senate passed legislation to suspend the debt limit for two years through July 31, 2021, eliminating the risk of default until the Senate votes on increasing it again in 2021. The existing limit as of the suspension currently exceeds $22 trillion, nearly double from where it was 10 years ago. (Sources: Commerce Department, Federal Reserve, Bloomberg, U.S. Treasury Department,

The 10-year Treasury yield dropped in July to its lowest level since 2016

Rates Drop Further – Fixed Income Overview

Fed Chair Jerome Powell communicated that the reduction in the Fed Funds rate was not going to be a series of reductions, but rather a wait and see approach contingent on economic progress over the next few months.

The Fed’s reduction to the Fed Funds rate was the first since 2008 when the financial crisis had begun. The Fed Funds rate was essential zero from the end of 2008 to the beginning of 2016 when the Fed started raising the target rate again.

The 10-year Treasury yield dropped in July to its lowest level since 2016 as markets assessed the Fed Chairman’s comments surrounding any possible rate cuts over the next few months. The Fed Funds futures market is pricing in a near certain possibility of another rate reduction in September 2019.

Negative interest rates outside the U.S., combined with expectations of weaker economic growth and minimal inflation, have weighed on long-term Treasury bond yields. (Sources: Federal Reserve, U.S. Treasury)

Low Rates & Improved Earnings Send Stocks To Highs In July – Equity Overview

While stocks were driven by a Fed rate cut expectation in July, earnings also became a focal point as economic weakness abroad and a strong dollar have created a challenge for earnings of U.S. multinational firms.

U.S. corporate earnings have proven to be more resilient than expected as earnings beat expectations for a swath of companies in the equity indices. The ability for companies to continue earnings increases in a slow growth environment is optimistic for the equity markets.

Sectors leading the equity markets in July included Information Technology, Communication Services, and Financials. Driven by better than expected earnings and revenue growth, the sectors were also influenced by the low rate environment and continuing consumer demand. (Sources: S&P, Federal Reserve)

The debt limit has been raised 79 times since its creation in 1917

Debt Limit Gets Put On Suspension – Fiscal Policy Overview 

Formally known as the statutory debt limit, the United States debt ceiling or debt limit is a legislative restriction on the amount of national debt that can be issued by the Treasury. The debt limit has been raised 79 times since its creation in 1917, with 17 of these increases occurring over the past 20 years.

The debt ceiling may also be suspended, meaning that spending can continue without a Congressional vote until a specific date. On July 21st, Congress voted to suspend the debt limit until July 21, 2021, thus allowing for an increase in borrowing to meet expected expenses over the next two years.

The United States has maintained legislative restriction on debt since 1917. To control the amount of total debt outstanding, Congress has placed restrictions on Federal debt issuance since the passing of the Second Liberty Bond Act of 1917, which eventually evolved into a general debt limit in 1939. The Second Liberty Bond Act of 1917 helped finance the United States’ entry into World War I, which allowed the Treasury to issue long-term Liberty Bonds.

Periodically, a political dispute arises over legislation to raise the debt ceiling. Until the debt ceiling is raised, the Treasury undertakes what is termed as “extraordinary measures”, which essentially buys more time for the ceiling to be raised. 

The United States has never reached the point of default, where the Treasury is unable to pay its obligations. In 2011 the United States reached a point of near default, which in turn triggered the first downgrade of U.S. debt by credit rating agencies. Congress raised the debt limit with the Budget Control Act of 2011, which led to the fiscal cliff and set a new debt ceiling that was reached on December 31, 2012.  (Source: Congressional Research Service)

How Tart Cherries Became The Latest Trade Battle – Trade Policy Update

Apart from high-tech components and mass produced gadgets from China, tart cherries imported from Turkey are encroaching on U.S. cherry farmers in Michigan and Washington.

The U.S. cherry industry petitioned the U.S. Commerce Department to impose tariffs on the import of tart cherries from Turkey. The complaint claims that cherry exporters are being subsidized by the Turkish government to dump tart cherries on the U.S. market at below market prices. 

The USDA noted that in 2018 Turkey cherry exporters were selling tart cherries in the U.S. market for 89 cents per pound, while U.S. cherry farmers were selling the same tart cherries for $4.60 per pound. Such a price disparity is identified as dumping by the Commerce Department, especially when government subsidies are suspected. (Sources: USDA, U.S. Commerce Department)

Mortgages account for 2/3's of the $13.67 trillion in U.S. household debt

Mortgage Rates Drop But Homes Are Still Expensive – Housing Market Review

Falling interest rates have prompted an increase in mortgage activity as the cost to borrow for home buyers has become less expensive. Mortgage rates fell in late July to the lowest levels since late 2016, with the average on a 30-year fixed rate conforming loan falling to 3.75%, down from 4.94% in November 2018.

The challenge for many homebuyers has been rising home prices and affordability throughout the country. Slow rising wages and stagnant incomes have, for the most part, not kept up with rising home prices. Even though mortgage rates have dropped, housing prices are still elevated to the levels that force many to wait or rent until housing prices drop. Data tracked by the Federal Reserve Bank of St. Louis and Freddie Mac reveal that even as mortgage rates fell since the beginning of the year, affordability still declined. Affordability is the ability of a homebuyer to purchase a home and pay for all related expenses with an existing income.

Mortgages accounted for two-thirds of the $13.67 trillion in U.S. household debt in the first quarter. Because they are typically paid off over decades, mortgage rates tend to be correlated with 10-year Treasury bond yields rather than with the short-term rates controlled by the Federal Reserve. (Sources: Federal Reserve Bank of St. Louis, Freddie Mac)

Some States Growing Faster Than The Rest Of The Country – Domestic Economy

Economic growth across the country varies by several factors, including demographics, education, weather, and industry. The first quarter of 2019 saw an increase in GDP of 3.2% nationwide, yet certain states realized much stronger growth than others.  West Virginia topped every other state in the first quarter, with a 5.2% growth rate. Texas, New Mexico and Utah also saw greater than average growth over the same period.  Some states, such as Texas, continue to experience a large influx of new residents from other states such as California. Texas offers more affordable housing, ample jobs, and no state income tax relative to California. Texas has also seen a tremendous demand for oil industry workers as the oil sector in the state has expanded because of shale drilling. States with older populations and less qualified workers are seeing less growth and even an exodus of people. New Jersey, Maryland, Mississippi and Hawaii were among the slowest growth states in the first quarter, where demographics and the cost of living influence the local economies more than other states.

 (Source: U.S. Bureau of Economic Analysis)

Fraud Alert - Social Security Spoofing

Social Security Scams

An increase in fraudulent calls from people claiming to be from the Social Security Administration have taken different forms with the intent to obtain sensitive information.

Individuals are receiving phone calls displaying the Social Security Administration’s (SSA) phone number on caller ID. The callers are reportedly attempting to obtain personal information, including Social Security numbers. If you receive this type of call, you should not engage with the caller or provide personal information or payment in response to any requests or threats.

A caller-ID “spoofing” scheme misusing the Social Security Administration (SSA) Office of the Inspector General’s (OIG) Fraud Hotline phone number. The OIG has received recent reports of phone calls displaying the Fraud Hotline number on a caller-ID screen. OIG employees do not place outgoing calls from the Fraud Hotline 800 number. You should not engage with these calls or provide personal information.

Fraudulent phone calls from people claiming to be from SSA.  Recent reports have indicated that unknown callers are using increasingly threatening language.  The callers say that due to improper or illegal activity with your Social Security number (SSN) or account, you will be arrested or face other legal action if they fail to call a provided phone number to address the issue. You should not engage with these calls or provide any personal information.

Calls displaying 1-800-772-1213, SSA’s national customer service number, as the incoming number on caller ID.  People who have accepted these calls said the caller identifies as an SSA employee.  In some cases, the caller states that SSA does not have all of the person’s personal information, such as their Social Security number (SSN), on file.  Other callers claim SSA needs additional information so the agency can increase the person’s benefit payment, or that SSA will terminate the person’s benefits if they do not confirm their information.  This appears to be a widespread issue, as reports have come from citizens across the country.

Source: Office of the Inspector General; Social Security Admin.,

Cyber intrusions are becoming more sophisticated

Protecting Yourself From Identity Theft – Personal Finance

The threat is serious—and growing. Cyber intrusions are becoming  commonplace. With more and more of us spending time online for shopping, banking and keeping in contact with our friends and family, it’s important to understand how important it is to protect yourself online.

Strong Passwords Matter

One of the first steps in protecting your identity online is creating a password that cannot be easily obtained by hackers or someone else who will use it to steal your identity. There have been numerous stories about people who have used “password” or “12345” for their password. Avoid pet and children’s names, dates of birth and other personally identifiable information. Also make sure you do not share your passwords with anyone, regardless of how much you trust them.

Smart Following of Links

Email availability has created a whole new world for identity thieves. Oftentimes, people see emails from PayPal, their banks or other financial institutions stating there have been holds or stops placed on their accounts. These emails typically contain a link for you to “reset” your information but the fact is that these links go someplace else where your identity is stolen. Financial institutions will not request personal information via email; they’ll contact you directly by phone or snail mail. If you get a link in email, don’t click on the link; instead go directly to the site by typing the name of the site right into your search bar to determine if you’ve actually been contacted by your institution.

Social Media Sharing Caution

Many of us contact friends, family members and share vacation and other information on social media sites like Twitter and Facebook. Too often, we share information that we’re not going to be home which can allow identity thieves to scope out our homes and collect mail that could have personally identifiable information while we are away. Keep your private information including your address private while on social media sites to minimize the potential of having your identity stolen.

Identity theft is unfortunately on the rise. Thieves who can command the use of your name and other personally identifiable information may set up financial accounts including bank accounts, take out mortgages and open credit cards in your name. Too often, you will not find out that your identity has been stolen until you try to take out a home or car loan. These are some basic things you can do to prevent identity theft online. However, keep in mind, any information you post online stays available. Keep yourself as safe as possible. (Source: U.S. Department of Justice; Victims of Identity Theft, FBI)