Top Three Market Headlines

Volatile Week for Stocks: The first week of August proved turbulent for stocks as investors reacted to escalating trade tensions and slowing global economic growth. The week got off to a rocky start as the S&P 500 plummeted 3% on Monday after China let its currency weaken against the U.S. dollar; concurrently, the CBOE Volatility Index spiked nearly 40% on the day to its highest level since early January. After a slight recovery on Tuesday, Wednesday was marked by elevated intraday volatility, as markets tumbled at the open on weak global economic data before clawing back over the course of the day to finish even. Bulls took control on Thursday, pushing the S&P 500 to its best daily gain in two months, at 1.9%, but the optimism was short-lived as markets closed the week with losses on Friday. 

Chinese Currency Weakens: The People’s Bank of China (PBOC) last week allowed the Chinese currency, the yuan, to fall to its weakest level relative to the U.S. dollar since 2008. On the morning of Aug. 5th, the central bank set the so-called reference rate for the currency below the psychologically-important level of 7.0 per dollar. (Each day the PBOC establishes a reference rate and allowable trading band for the value of its currency). The move, which sent shock waves through global financial markets, was viewed by many as retaliation for President Trump’s announcement the prior week of additional tariffs on Chinese imports, as a lower yuan would make Chinese products more affordable and thereby offset the effect of the tariffs.   

Bond Yields Keep Falling: Amid slowing global economic growth and investors’ flight to safety from rising equity market volatility, government bond yields around the world plumbed new depths last week. The yield on the 10-year U.S. Treasury bond fell below 1.6% to its lowest level since October 2016, while the German 10-year government bond yield fell to -0.60%, its lowest level since 2006. Around the globe, approximately $15 billion in bonds offer negative yields. Adding fuel to concerns about slowing economic growth, the central banks of three additional countries―India, New Zealand and Thailand―cut interest rates last week by more than investors expected. 

Data Points

• The CBOE Volatility Index hit 24.81 on August 5th, its second-highest level of 2019.
• China’s central bank devalued the country’s currency to its lowest level since 2008.
• The yield on the 10-year US Treasury fell below 1.6%, its lowest level since 2016.

Yahoo 8/9/2019, Bloomberg 8/2/2019, MarketWatch 8/2/2019, WSJ 7/31/2019, 8/8//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.