Weekly Snippet

Comments Off by in CMW News
April 5, 2019
Weekly Snippet

Last Week…

…Concluded the 1st quarter of 2019 and as you can see from the chart ALL asset classes maintain a positive year-to-date return.

Despite the murmurs of uncertainty in the economy the market seemed unfazed with a strong finish on Friday.

All U.S. equities were up from the previous week, and not just slightly.

  • Up over 2% from the previous week were: Mid Growth and Value and Small Growth and Value.
  • Not far behind was Large Growth & Value and Health Care, up over 1%.

The asset classes that were down last week were all Foreign, including:

  • Large Blend: Large Value, Small Caps, Emerging Markets and Foreign Bonds.
  • All other bonds were up slightly.

So let’s talk about something that has been covered quite a bit in the news this past week – the inverted yield curve.  This shouldn’t be a new term for most of you – we’ve talked about it quite extensively.

On Friday, March 22nd, the dreaded yield curve inversion happened–que the media fear frenzy. What does that mean? Look at the comparisons below of a normal yield curve and the inverted yield curve from March 22nd.  A normal yield curve shows that interest rates for 10-year treasuries are higher than short term rates.  Makes sense right?  If your money is going to be tied up longer, you expect to receive a larger return.  The Fed has been steadily raising rates on short-term borrowing, but it usually takes a while for the market to adjust and the long term respond in kind.  On March 22 the yield on the 10-year Treasury note tumbled to 2.44% Friday, its lowest level since January 2018. That was just below the 2.45% yield on three-month Treasury bills.

Why is this such a big deal?  An inverted yield curve has generally, but not always, preceded a recession. When it does, it is usually delayed and may not happen right away, but recessions have followed inversions a few months to two years later seven out of nine times over several many decades.

Now, we are not here to say that a recession and a bear market that may precede one is right around the corner just because the yield curve inverted for a day or two – because it has indeed already returned back to a normal yield curve.  There are many other factors that lead to a bear market.  As you can see from last week’s report, the bull took that news in stride, shook it off and charged forward. And remember, as we noted before, the widespread fear of this foreboding ‘signal’ is more bullish than the lack of it in our view.

Have a great weekend!

Indexes are listed in respective order to their reference above: DJ Industrial Average TR USD, S&P 500 TR, DJ US TSM Large Cap Growth TR USD, NASDAQ 100, Technology NTTR TR USD, DJ US Health Care TR USD, DJ US TSM Large Cap Value TR USD, DJ US TSM Mid Cap Growth TR USD, DJ US TSM Mid Cap Value TR USD, DJ US TSM Small Cap Growth TR USD, DJ US TSM Small Cap Value TR USD, FTSE NAREIT All Equity REITs TR, DJ Gbl Ex US Select REIT TR USD, Bloomberg Commodity TR USD, MSCI EAFE NR USD, MSCI EAFE Growth NR USD, MSCI EAFE Value NR USD, MSCI EAFE Small Cap NR USD, MSCI EM NR USD, BBgBarc US Corporate High Yield TR USD, FTSE WGBI NonUSD USD, JPM EMBI Plus TR USD, BBgBarc US Govt 1-3 Yr TR USD, ICE BoafAML 1-3Y US Corp TR USD, BBgBarc Intermediate Treasury TR USD, BBgBarc Interm Corp TR, BBgBarc US Treasury US TIPS TR USD. These materials have been prepared solely for informational purposes based upon data generally available to the public from sources believed to be reliable. All performance references are to benchmark indexes. Performance of specific funds will vary from respective benchmarks. Past performance is not an assurance of future results. Each index cited is provided to illustrate market trends for various asset classes. It is not possible to invest directly in an index.