Week in Review

Week in Review: May 20, 2019


U.S. equities closed the week lower, after China’s announcement over the previous weekend that it would impose retaliatory tariffs on U.S. imports startled investors and rippled through financial markets. Earlier this year, signs of progress and hopes of a trade deal paved the way for a rally in U.S. and global equities. However, the latest round of tit-for-tat tariffs soured investors’ hopes that a trade resolution was imminent. Later in the week, market sentiment improved after President Trump decided to delay tariffs on imported cars from the European Union and Japan. As a result, the S&P 500 closed the week 0.7% lower, while the NASDAQ Composite retreated 1.2%.

The Commerce Department reported that U.S. homebuilding increased more than expected in April, suggesting declining mortgage rates were starting to provide some relief to the struggling housing market. Another report showed the number of Americans seeking unemployment benefits fell more than expected last week, pointing to sustained labor market strength that should underpin the economy. Despite the encouraging outlook, sales at U.S. retailers fell in April for the second time in three months, down 0.2% from March. Retail sales are closely monitored because they make up near one-third of consumer spending, which drives most of the U.S. economic activity. Despite the shortfall, a tight labor market and modest wage growth gains helped U.S. consumer sentiment jump to a 15-year high in early May. According to a report by the University of Michigan, consumers viewed prospects for the overall economy much more favorably than earlier this year, with the economic outlook for the near and longer term reaching their highest levels since 2004 (see figure 1). It is worth noting that the gains were recorded mostly before the trade negotiations with China collapsed and China responded with their own tariffs.

International equities were mixed as a result of the deteriorating trade relations. Chinese equities were pressured after the Trump Administration increased scrutiny of Chinese telecommunication companies, declaring a national emergency over foreign threats to U.S. communications infrastructure and services. The crackdown on Chinese companies includes a trade black list that blocks certain companies from buying U.S. technology without special government approval. As a result, the MSCI Emerging Markets index closed the week 3.5% lower. Meanwhile, European stocks made a comeback later in the week after President Trump delayed plans to implement auto tariffs on European car imports. The announcement buoyed European automakers helping the MSCI EAFE index close relatively flat.

On the fixed income front, added trade war fears led investors to move towards lower-risk investments such as U.S. government bonds, in turn pushing the yield on the benchmark 10-year Treasury note down to its lowest level in nearly a month. As a consequence, the Treasury yield curve inverted again on Wednesday as the 10-year yield fell below the 3-month yield, a signal that has often preceded a recession – if the inversion would persist and deepen. The recent trade tensions have cast a shadow over the outlook for global growth and fueled expectations that the Federal Reserve may have to cut interest rates sometime this year, after tightening four times in 2018.

Figure 1: University of Michigan Consumer Sentiment Index

Graph showing University of Michigan Consumer Sentiment Index

 Source: Thomson Reuters (as of 5/20/2019)

Market Returns (USD)





Global Equities

MSCI All Country World

-0.7% 0.1% 12.2% 0.1%

S&P 500

-0.7% 1.2% 15.0% 7.3%

Dow Jones Industrial Average

-0.6% -0.3% 11.5% 6.7%


-1.2% 1.3% 18.3% 7.0%

Russell 2000

-2.3% -0.1% 14.4% -4.2%


0.2% 0.3% 10.3% -6.3%

MSCI Emerging Markets

-3.6% -5.6% 3.7% -10.8%

Fixed Income

ICE BofAML Municipals 1-10 Year A-AAA 

0.3% 0.9% 3.2% 5.6%

Bloomberg Barclays Intermediate Government/Credit

0.3% 0.6% 2.9% 5.9%

Bloomberg Barclays High Yield Bond

-0.1% 0.9% 8.2% 6.1%

JPMorgan GBI Emerging Markets Global Diversified

-0.6% -1.0% 1.9% -1.4%

Market Levels


Week Ago

Year End

Year Ago

S&P 500

2859.53 2881.4 2506.85 2720.13

Dow Jones Industrial Average

25764 25942.37 23327.46 24713.98

10-Year U.S. Treasury Yield (Constant Maturity)

2.39% 2.47% 2.69% 3.11%

Gold ($/oz)

$1,277.53 $1,286.05 $1,282.49 $1,290.79

Crude Oil ($/barrel)

$62.76 $61.66 $46.93 $66.17

U.S. Dollar / Euro ($/)

1.12 1.12 1.15 1.18

U.S Dollar / British Pound ($/£)

1.27 1.30 1.28 1.35

Japanese Yen / U.S. Dollar (¥/$)

110.08 109.95 109.69 110.77
What's Important

U.S. equities came under pressure after China announced retaliatory tariff increases on U.S. imports

Before the trade escalation, U.S. consumer sentiment index had surged to highest level in 15 years

Investors pivoted toward safer assets driving U.S. Treasury yields lower