Market Monitor: September 2019 Update

Twice a month, we send clients this overview of the markets and roundup of key economic news stories. Similar to Altair Insight, it enables us to share our big-picture views while also highlighting select market returns and developments that we feel are important.

Headlines and Highlights
  • House launches impeachment inquiry: Congressional Democrats announced a formal impeachment inquiry following reports that President Donald Trump withheld aid to Ukraine while pressing the Ukrainian president to investigate Trump’s political rival Joe Biden. Some top Democrats want to prepare articles of impeachment by Thanksgiving and aim for a full House vote by the end of this year. If a majority of the House votes to impeach, the Republican-controlled Senate must hold a trial and vote on whether to acquit or convict Trump, with a two-thirds vote required to impeach.
  • Stocks eke out September gains amid ongoing challenges: Investors mostly shook off concerns about trade, Iran, Brexit and impeachment to send markets broadly higher in September. Many cyclical and tech stocks struggled, however, as investors shied away from higher growth sectors like technology and communication services in favor of traditional value sectors like financials, real estate and utilities. The Standard & Poor’s 500 Index has gained 20.6% for the year but is up just 4.7% from a year ago.
  • U.S. manufacturers experience weakest month in a decade: The ISM Manufacturing Index slid to its lowest reading since June 2009 at 47.8, with anything below 50 signifying a contraction. Manufacturing, which accounts for about 11% of the economy, has been hobbled recently by the U.S.-China trade war and slowing global economic growth. However, the slump would have to get much deeper and affect the rest of the economy to cause a recession.
Selected Market Returns

market monitor

Sources: Morningstar, Altair Advisers
Our Views
  • Trade talks between the United States and China scheduled to begin October 10th have the potential to hasten a partial or interim deal between the two sides. While the trade war is unlikely to be fully resolved any time soon, we believe President Trump will seek an agreement of some kind in order to claim a victory before his re-election campaign shifts into full gear next year.
  • U.S. economic data has been mixed lately but we still view a recession in the next 12 months as unlikely. Softness in manufacturing joins lagging business confidence and capital spending as areas of current concern; the employment, housing and consumer sectors, meanwhile, remain healthy.
  • The impeachment inquiry adds uncertainty for investors but is not an immediate threat to markets. History provides mixed evidence on whether the impact ultimately will be negative, neutral or even positive. The short-term effect may be to further slow the legislative agenda in Washington.
  • We expect the Federal Reserve to continue to be accommodative in its monetary policy and support markets. Traders currently expect one more rate cut this year, at the Fed’s meeting either this month or in December.
  • Negative-yielding debt has grown to more than $15 trillion worldwide, a continuing incentive for many investors to hold stocks rather than bonds. We believe the historic drop in yields reflects an overly pessimistic view of the global economy, given the International Monetary Fund’s projection for increased growth in 2020.

The material shown is for informational purposes only. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, and actual results may differ materially from those anticipated in forward-looking statements. As a practical matter, no entity is able to accurately and consistently predict future market activities, and all investments are subject to the risk of loss. While efforts are made to ensure information contained herein is accurate, Altair Advisers LLC cannot guarantee the accuracy of all such information presented. Material contained in this publication should not be construed as accounting, legal, or tax advice.