Weekly Market Update: September 30, 2019

Top Three Market Headlines

Weakness in the European Manufacturing Sector: Data out of the Eurozone last week reflected the continuing challenges facing European economies, particularly in the manufacturing sector. The IHS Markit Eurozone Manufacturing PMI Index, which tracks sentiment among manufacturing companies in the Eurozone, fell in September to an 83-month low of 45.6 (a reading below 50 signals contraction). Germany led the weakness, with its Manufacturing PMI Index tumbling to a decade low of 41.4. There are growing concerns that the slowdown in manufacturing will spill over to the broader Eurozone economy, with indicators like the Eurozone Services PMI falling to an 8-month low of 52.0 in September. These weakening trends were a key catalyst behind the European Central Bank’s recent decision to cut interest rates and relaunch its quantitative easing program.

Chinese Central Bank Holds Fire Despite Sluggish Economy: According to the China Beige Book, a quarterly report based on interviews with thousands of firms in China, the country’s economic growth continued to weaken in the third quarter. The manufacturing sector has been the primary driver of the softness, although the service and property sectors have also deteriorated. This latest report follows the recent news that the Chinese expanded at a 6.2% rate in the 2nd quarter, its lowest rate of growth in nearly three decades. Despite the slowdown, the Chinese central bank stated last week that it does not presently plan to adopt an aggressive monetary policy response, such as cutting interest rate cuts. 

Consumer Confidence Dips: The Conference Board last week released its September U.S. Consumer Confidence Survey, which slipped to a reading of 125.1, below the median expectation of 133.5 and down from 134.2 in August. Consumers reported being less positive about both current economic conditions and the short-term outlook for the economy. Survey results have jumped around in 2019, ranging from a low point of 121.7 in January to a high mark of 135.8 in July, illustrating how sensitive the U.S. consumer has been to alternating developments surrounding trade disputes, among other factors. 

Data Points

• The European Manufacturing PMI fell to 45.6 in September, almost a 7-year low
• China’s economy grew 6.2% pace in Q2 2019, its slowest pace since 1992
• The U.S. Consumer Confidence Survey fell to 125.1 in September from 134.2 in August

CNBC 9/23/2019, Marketwatch 9/23/19, WSJ 9/24/19, Bloomberg 9/24/19, HIS Markit 9/23/19, The Conference Board, 9/24/19. 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.