This Weekly Market Update reviews the top three market headlines: U.S.-China Trade Talks Stall, Equity Market Volatility Rises, Inflation Gauges Remain Muted in April.
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U.S.-China Trade Talks Stall: Progress towards a trade deal between the U.S. and China stalled last week when U.S. negotiators claimed that China had reneged on previous commitments. In response, the U.S. increased tariffs on $200 billion of Chinese imports from 10% to 25% and threatened to impose additional hikes on practically all Chinese imports. The Chinese government said it would be forced to retaliate. While it would take weeks to deploy, the U.S. tariff increase would have repercussions on the global economy. The standstill unnerved investors, with the S&P 500 posting its worst weekly loss in 2019.

Equity Market Volatility Rises: Amidst the break in U.S.-China trade negotiations, the CBOE Volatility (VIX) Index rose last week, hitting an intra-day high of 23.4 on Thursday, its highest point since last December. The Index, which reflects investors’ estimates of market volatility embedded in the pricing of S&P 500 index options, had retreated in 2019 below its long-term average of approximately 20.0 as investors cheered the Federal Reserve’s dovish pivot and a seeming de-escalation of trade tensions.

Inflation Gauges Remain Muted in April:The Bureau of Labor Statistics last week released two monthly gauges of U.S. prices, the consumer-price index (CPI) and the producer-price index (PPI). The CPI rose 0.3% in April from March, or 2.0% compared to the prior year. Core CPI, which excludes the effects of volatile food and energy prices, rose 0.1% and 2.1% versus the prior month and year, respectively. PPI, a measure of the prices businesses receive for their goods and services, also remained subdued, rising 0.2% from March and 2.2% from the prior year; this was considerably less than the recent peak of 3.4% annual growth reached last summer. The latest muted inflation readings are likely to bolster Federal Reserve officials’ recent decision to keep interest rates on hold.

As of May 10, 2019

Week

Quarter-To-Date

Year-To-Date

One-Year

MSCI All Country World

-2.53%

0.79%

13.06%

0.83%

S&P 500

-2.10%

1.87%

15.77%

7.99%

Russell 2000

-2.52%

2.25%

17.17%

-0.56%

MSCI EAFE

-2.63%

0.04%

10.02%

-6.06%

MSCI Emerging Markets

-4.52%

-2.16%

7.54%

-8.44%

FTSE NAREIT

-0.93%

0.29%

16.67%

15.69%

Bloomberg Commodity

-1.43%

-2.72%

3.43%

-11.15%

Barclays Aggregate

0.31%

0.27%

3.22%

5.71%

WSJ 4/18/2019, 4/18/2019, 4/18/2019, 4/26/2019 Bloomberg 4/25/2019: Data from Morningstar Direct. Returns for periods greater than one year are annualized. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, an SEC Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC does not express an investment opinion regarding any specific commodity, sector or individual security. Unless otherwise expressly noted, the contents of this communication do not constitute securities or investment advice, nor should this communication be construed as an opinion regarding the appropriateness of any investment. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Neither Arthur J. Gallagher & Co., Gallagher Fiduciary Advisors, LLC nor their affiliates provide accounting, legal or tax advice. The information provided cannot take into account all the various factors that may affect your particular situation, therefore you should consult your Gallagher Fiduciary Advisors consultant before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.