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Weekly Market Newsletter

Weekly Market Newsletter

August 06, 2019

No Non Sense News

Today is Tuesday, August 6 and it is 4:00 PM.

I wanted to touch base with everyone to give you an update on recent market developments. As you all know, China’s currency devaluation, as a reaction to increased tariffs, triggered a sizeable market sell off yesterday. Virtually all sectors were negatively affected. Consistent with market history, the market had taken the stairs up and now appears to be taking the elevator down. Below is the chart of the Chinese currency relative to the US Dollar. You can see it has broken the psychological 7.0 level.

From a trend standpoint, all major averages remain above their long term trend lines except for the Russell 2000 (small caps). A China trade deal now appears less likely in the near term. As a consequence, flows toward fixed income have increased and interest rates have fallen as a result. This thereby increases the probability of additional Fed Funds Rate cuts starting in September. Cutting rates will also act to reduce the probability of a recession or at least possibly delay it.

Of course, let’s not forget that we just went through a 20% correction peak to trough from October to December of 2018 which was largely attributed to restrictive Fed monetary policy.  That was followed by a rally to new highs when the Fed decided to reverse policy. So the ebb and flow of the market continues.

On the Real Estate side, here is a nice chart showing how home equity growth has recovered nicely since the great recession.

And if rates fall as expected, the possibility of a real estate refinance boom increases. So in the midst of significant negative news coverage; there are still some things to be excited about. As always should you have any questions, don’t hesitate to call.

Market Overview

Dow Jones Industrial Average Index

Nasdaq Composite Index

S&P 500 Index