This Weekly Market Update reviews the top three market headlines: Federal Reserve Vexed by Low Inflation, OECD Sees Slowing Global Growth, Euro Zone Economy Struggles.
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Federal Reserve Vexed by Low Inflation: The sustained absence of inflation pressures on the U.S. economy was a hot topic among Federal Reserve officials at the Fed’s early-May meeting, according to minutes of the meeting released last week. Several officials expressed concern about the failure of inflation to reach the central bank’s target of 2%. For instance, the Fed’s preferred inflation indicator, known as the personal consumption expenditures deflator, has fallen short of 2.0% annual growth for each of the last five months through March, while the core version of the same index, which excludes food and energy costs, has failed to hit the 2% mark for each of the last three months. These stubbornly low readings have convinced an increasing number of pundits that the Fed is unlikely to raise interest rates again anytime soon, despite solid economic and job market growth.

OECD Sees Slowing Global Growth: The Organisation for Economic Cooperation and Development (OECD), an intergovernmental economic organization with 36 member countries, has modestly lowered its 2019 global economic growth expectations, according to its biannual Economic Outlook that was released last week. The OECD now projects global GDP to grow at a 3.2% rate for 2019, down from its previous estimate of 3.3%, as trade disputes are expected to limit growth in trade flows to 2.1%, which would be the lowest rate in a decade. The OECD noted that the global economy is expected to achieve moderate growth over the next few years, but cited a number of risks, including continued trade tensions, risks in financial markets and a slowdown in China.

Euro Zone Economy Struggles: Economic data out of the Eurozone last week indicated the regional bloc continues to face challenging business conditions as a result of weaker global growth, trade tensions and Brexit. The IHS Markit Flash Composite Manufacturing Purchasing Managers’ Index (“PMI”), considered to be a good barometer of industrial economic activity, registered below 50 for the fourth consecutive month (a reading above 50 indicates growth, while a sub-50 reading reflects contraction). Services businesses are currently faring modestly better, as the services PMI registered 52.8, This brought the overall PMI that incorporates both sectors to 51.6, a level that, according to IHM Markit, translates to a projected Eurozone GDP growth rate of a mere 0.2% for Q2.

As of May 28, 2019

Week

Quarter-To-Date

Year-To-Date

One-Year

MSCI All Country World

-0.94%

-0.89%

11.18%

-0.53%

S&P 500

-1.14%

0.02%

13.67%

5.71%

Russell 2000

-1.39%

-1.51%

12.85%

-5.72%

MSCI EAFE

-0.51%

-0.27%

9.69%

-5.61%

MSCI Emerging Markets

-0.87%

-6.46%

2.82%

-10.88%

FTSE NAREIT

0.13%

1.63%

19.09%

19.89%

Bloomberg Commodity

-1.21%

-2.58%

3.58%

-12.02%

Barclays Aggregate

0.27%

0.87%

3.84%

6.22%

WSJ 5/22/19, Bloomberg 5/23/19, Reuters 5/23/19, OECD 5/21/19, CNBC 5/21/19. 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.