September Market Commentary

US stocks rebounded in September driven by some improvement in US/China trade discussions and support from the Fed.  The US and China agreed to hold trade talks in Washington in October, reigniting hopes for a deal.  Trump announced the US would delay by two weeks tariffs set to begin 10/1/19 on $250 billion of Chinese imports and China said it will exempt certain agricultural products from the US from tariffs. Economic news showed a generally cooling economy.  Employers added 130,000 employees in August, below expectations and June and July hiring numbers were revised down.  The unemployment rate remained at 3.7% and wage growth held steady at 3.2%.  Manufacturing contracted for the first time in three years, small business confidence fell to its lowest level since 2012, consumer confidence fell more than expected in September and consumer spending slowed more than expected in August.  On the positive side, existing homes sales rose 1.3% in August, much higher than expected, and posted the first year over year gain in 17 months.  In September, US stocks rose 1.76% bringing the third-quarter performance to 1.16%.  For the year to date, US stocks have surged 20.09%.

Foreign stocks were the top-performing asset class for the month driven by supportive central banks and hopes over US/China trade discussions.  Economic news continued to be weak globally with contractions in manufacturing in Japan and Europe.  As a result, the European Central Bank cut its benchmark interest rate by 0.1% to -0.5% and launched a new bond buying package of $22 billion a month of eurozone debt that is expected to “run for as long as necessary.”  It’s the largest simulative move the central bank has made in three and a half years. In China, a manufacturing survey reached a five-month high, but concerns over the economy drove the central bank to inject the equivalent of $126 billion into the banking system in hopes of spurring the economy.  Negotiations between the European Union (EU) and Britain over Britain’s exit from the country bloc remain ongoing with a deadline of the end of October.  Britain’s Parliament approved a measure to block Britain from leaving the EU without an agreement, but currently, many diplomats see a no deal exit from the EU as the most likely scenario.  Saudi Arabia oil production facilities were attacked driving up the price of oil, but after it became clear they would be able to return to normal production levels quickly, oil fell and ended the month flat.  Emerging markets trailed developed markets for the month, quarter and year to date.  Foreign stocks rose 2.67% in September but were down 1.51% for the third quarter.  For the year to date, foreign stocks have climbed 12.01%.

Bonds ticked down over the month as economic concerns eased from their August levels.  The Fed voted to cut its benchmark interest rate to a range from 1.75% to 2.0% at their September meeting and comments made by Chairmen Powell left open the possibility of additional rate cuts.  The fed cited cushioning the US economy from a global economic slowdown and the US/China trade war.  The 10-year Treasury yield rose over the month to 1.68% after starting the month at 1.50%, however, it is down from 2.00% at the start of the quarter.  For the month, credit bonds were the top-performing sector and shorter-term bonds outpaced longer-term bonds.  For the quarter it was the reverse with Treasury bonds and longer-term bonds the top performers.  The broad bond market fell 0.53% in September but was up 0.75% for the third quarter.  Bonds have gained 8.52% for the year to date.