The Markets This Week

by Connor Darrell CFA, Assistant Vice President – Head of Investments
Global equities slid lower last week as investors grappled with continued trade and geopolitical uncertainty, including the announcement by House Speaker Nancy Pelosi of an official impeachment inquiry. Also noteworthy was that shares of fitness equipment manufacturer Peloton fell dramatically on their first day of trading, the latest in a flurry of disappointing initial public offerings (IPOs) this year. Peloton’s disappointing trading debut was further evidence of waning enthusiasm for so called “unicorns” – private companies with valuations in excess of $1 billion, many of which are still relatively immature and not yet profitable.

Despite the ongoing political and trade sagas, the most impactful driving force in markets during recent months has been central bank activity. Both the ECB and the Federal Reserve cut their policy targets during September, and several other banks issued forward guidance that suggested an easing in monetary policy was on the table. Bond yields have moved lower as a result of the shifting tone and continued evidence of softening in the global economy (particularly in manufacturing) and continued that trend last week. In aggregate, the bond market generated modest returns as rates shifted lower.

Politics in both China and the U.S. Creating More Uncertainty
According to comments made by Treasury Secretary Steve Mnuchin during the week, trade talks with China are expected to resume in early October. The two sides will sit down to try and make progress on a trade agreement even as both Presidents face mounting political pressure at home.

For President Trump, the impeachment inquiry will undoubtedly put additional pressure on his relationships with senior advisors and could add an additional layer of complexity to future budget negotiations; in addition to the obvious potential for impacts on his political capital. Ultimately however, with the Republicans still holding a majority in the Senate and a two-thirds vote required to remove the president from office, a transition of power looks highly unlikely. But if the inquiry extends beyond what many seem to believe, the political pressure created by the inquiry might encourage the White House to reach a trade deal sooner rather than later.

For President Xi, the ongoing protests and unrest in Hong Kong represent a difficult situation as well. If Xi is forced to give in to any of Hong Kong’s demands, it could create a perception of weakness and put additional pressure on him to be particularly steadfast in his negotiations with the United States in an attempt to preserve his public image in China. This would likely make a trade deal more difficult to reach.

Ultimately, we continue to advise clients against implementing wholesale portfolio changes in the wake of geopolitical news. While uncertainty often leads to volatility, long-term market performance is driven primarily by economics rather than politics.

The Numbers & “Heat Map”

Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Freddie Mac

The health of the U.S. economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.



Our consumer spending grade remains an A. Surveys of US consumers continue to indicate that the consumer is in a strong position, and recent GDP data provided further evidence of healthy consumer spending.



Our Fed Policies grade has been increased to A- after the Federal Reserve cut its interest rate target by 25 bps following its most recent meeting. This marks the second time the Fed has cut interest rates in the past few months, but Chairman Jerome Powell hinted that he does not expect “a more extensive series of rate cuts” moving forward.



With most S&P 500 companies having reported Q2 earnings, the EPS growth rate for the second quarter is close to zero. Despite the weak growth rate, almost 75% of companies have beaten consensus estimates this quarter.



The US economy added 130,000 new jobs in August, below the consensus expectations of analysts. However, despite the lower than expected job creation, there was evidence of an acceleration of wage growth. The labor market continues to look quite healthy.



Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.




Following a re-escalation of the US/China trade dispute, we have raised our “international risks” metric back to a 7. Other key areas of focus for markets include the ongoing Brexit negotiations, rising economic nationalism around the globe, and escalating tensions in the Middle East.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.


Meet the Team
Stefany Allen, Administrative Assistant

Year at VNFA: 1 ½
“The thing I enjoy most about my job at Valley National is taking care of our clients and getting to know them.”

About Stefany: I live in Bethlehem with my husband, Nick, and dog, Cooper. We both enjoy time with family/friends. We have three nieces and three nephews who we adore and see as much as possible. We support our military – my husband is a disabled veteran who is still enlisted in the Army Reserve.

Fun Fact: Fall is my favorite time of year!

Interests/Hobbies: During the week, after work, I like to keep busy cooking and going to the gym. I enjoy trying new recipes for dinner. I love watching college football and I am a huge Notre Dame fan. I also enjoy the beach, especially travelling to the Caribbean.

“Your Financial Choices”

The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®.

This week, Laurie and her guest Steve Stelzman from The Mortgage Co. will discuss: “Mortgages and refinancing.”

Laurie and Steve will take your questions either live on the air at 610-758-8810 or in advance via

Recordings of past shows are available to listen or download at both and