US Economy: Consumers OK.
US consumers continued to spend (+0.1% in Aug.) and find job opportunities (3.7% unemployment). But businesses have grown cautious; their spending was revised downward -1.4% in Q2 and US manufacturing expectations hit the lowest level in 10 years.
US Stocks: Small-cap rebound.
Optimism about the resumption of US-China trade talks in October and expectations for a Fed rate cut sent most US equities higher. Small-cap stocks, which have been lagging, saw a small rebound in relative return and were the top domestic performers for the month.
Foreign Stocks: Value overseas?
Non-US developed equities outperformed with strong results in both Asia and Europe. While the economic fundamentals aren’t particularly attractive relative to the US, more investors have been attracted to the cheaper valuations following the runup in US stocks.
Fixed Income: Lower rates, prices in check.
The Fed cut interest rates for the 2nd time in 2019 (25 basis points in mid-Sept.), citing deteriorating global economic conditions and tame inflation. Weakness in US manufacturing may give the Fed reason to lower rates again in October if inflation doesn’t continue to creep upward.
Real Assets: Infrastructure on top.
Infrastructure assets led the real assets category in Sept. Over the last few months, less economically sensitive, “pure play” infrastructure companies outside the energy supply chain have improved both the diversification and return profiles of portfolios as market jitters have increased.
Alternatives: Managed futures lag.
Hedge fund strategies have quietly posted positive results the last few months. That said, managed futures strategies struggled greatly with volatility in the fixed-income markets, with US Treasury rates spiking only to fall back down by month end.
Equities Total Return
|U.S. Large Cap||1.9%||20.6%||4.2%|
|U.S. Small Cap||2.1%||14.2%||(8.9%)|
Fixed Income Total Return
|U.S. Agg. Bond||(0.5%)||8.5%||10.3%|
|U.S. High Yield||0.3%||11.5%||6.3%|
|Munis Broad Mkt||(0.7%)||7.1%||8.7%|
Non-Traditional Assets Total Return
|Overall HF Market||0.4%||5.9%||0.0%|
|Gold Spot $/OZ||$1472||$1292||$1193|
|U.S. Dollar Index||92.3||91.4||90.4|