Stocks Surge Last Week!
All equity boats rose last week. China and the United States made a couple of concessions on the trade war front. China waived tariffs on some U.S. Agricultural goods, while the United States delayed implementation of new tariffs by two weeks. This news all by itself helped fuel the markets last week. Add in the fact that in Euro land, the European Central Bank (ECB) added larger than expected stimulus to try to kick Europe out of its economic slowdown. The ECB cut rates to minus 0.5% and restarted its bond buying stimulus program. Minus rates! Who would have thought we’d get to this? It’s been going on for a pretty long time now!
Rates here in the U.S. stabilized a bit with the 10 Year US Treasury closing at 1.90% last Friday, up from 1.50% on 8/31/2019. This led to the yield curve being no longer inverted, at least for the time being.
The Dow rose 1.65%, the S&P500 1.02%. The Russell 2000 led the way after under-performing most of 2019 with a lift off of 4.90%. Over the pond, not to be out-done, fueled by the ECB, the MSCI EAFE rose 1.99% and the Emerging Market Stock Index up 1.91%.
So Who Attacked the Oil?
On Saturday, an oil processing facility at Abqaiq and the Khurias Oil field was attacked, knocking out 5.7 million barrels of daily crude, shooting prices up globally. Our response so far has been to authorize the release of oil from the Strategic Petroleum Reserve to keep the markets supplied as necessary.
Yemen’s Houthi rebels claimed responsibility. The U.S. however, believes that Iran is behind the attack and we apparently are ready to respond when the “culprit” is verified. With sophisticated technology today, it seems that this could have been initiated from anywhere in the world. On the other hand, with today’s technology, I’d think we’d be able to determine who was behind the attacks factually. Let’s see where this one takes us!
Federal Reserve Meeting on Rate
Here we go, the Federal Reserve will announce on Wednesday its decision whether or not to reduce the Discount Rate further and if so, by how much? If the Saudi situation didn’t happen, the markets would probably be more fixated. It is widely believed that the Fed will cut rates 2 more times by year end, and in my opinion, that information is pretty much priced into the markets. So any deviation to not cut further may be seen as negative for equities and bonds.
I’m certainly hoping that we will not end up with negative interest rates, as many are speculating. I can’t imagine the U.S., along with many of our developed market counter-parts, all having government debt yields that are negative. When you take a step back and ask the question why, it can be a bit scary!!
Question of the Week…
1 barrel of crude oil accounts for how many gallons of gasoline?
Answer to last week’s question…!
How many times does our Federal Reserve meet during the course of the year to decide on interest rates policies?
- 8 times
- 6 times
- 12 times
- 4 times
The correct answer is #1 – 8 times. After this week’s meeting, The Fed will again meet on October 29/30 and again on December 10/11.