Presented by Mark Gallagher

General Market News
• The 10-year Treasury yield was as low as 1.47 percent late last week, before opening at 1.61 percent on Monday. The 30-year was below 2 percent for the first time ever. It opened at 2.11 percent on Monday, and the 2-year opened at 1.52 percent. Rates moved significantly lower, raising questions about the timing of the next recession. With yields close to historical lows and the Federal Reserve (Fed) just starting to lower rates, it is likely we will continue to see historically low yields across the curve.
• The S&P 500 fell by 2.9 percent on Wednesday, as investors flocked to safer fixed income assets. This reaction followed a negative gross domestic product print for the German economy for the second quarter (–0.1 percent) and the lowest factory output in China in 17 years. The index recovered in the second half of the week.
• Equity investors also sought out shelter last week in the traditional haven assets with bond proxy sectors, including consumer staples, utilities, and REITs. The top-performing sector, consumer staples, was supported by Walmart’s strong quarter-over-quarter online sales growth of 37 percent.
• Last week’s worst-performing sectors were financials, consumer discretionary, and energy. Wells Fargo and Citigroup were down 4.13 percent and 3.89 percent, respectively. Investors sold out of these positions following a yield curve inversion, which led to concerns over future net interest margins. The inversion earlier in the week came following growth concerns and led to a strong rally in longer-term bonds.
• On Tuesday, July’s Consumer Price Index data was released. It showed inflation of 0.3 percent for the month and 1.8 percent year-over-year. Higher gas prices combined with higher prices for key areas of the service sector were the major drivers of this growth. Despite the increase in July, consumer inflation still sits comfortably below the Fed’s 2 percent target.
• On Thursday, July’s retail sales data came in much better than expected. Sales grew by 0.7 percent during the month, against expectations for 0.3 percent growth. Once again, rising gas prices played a part in this beat. But the major driver for sales growth came from the nonstore sales category, which was boosted by the annual Amazon Prime Day sales event midmonth. This was a very encouraging report, as consumer spending is the major driver of overall economic growth. The strong result for July bodes well for third-quarter growth, as long as consumers continue to spend.
• On a more negative note, Thursday also saw the release of July’s industrial production report, which showed a 0.2 percent decline. This disappointing result was due in large part to a 0.4 percent drop in manufacturing output, where most major industries saw declines during the month. The slowdown in global trade has hurt demand for American goods abroad. Although the slowdown in production was disappointing, it is understandable given the current global trade landscape.
• The National Association of Home Builders Housing Market Index report for August was also released on Thursday. It showed an increase in home builder confidence, marking the second-straight month of increasing confidence. Prospective buyers ticked up to their highest level since October 2018, which could bode well for future home sales if mortgage rates remain low and draw in more would-be buyers.
• Despite the uptick in home builder confidence, construction data was mixed. Housing starts fell by 4 percent in July, against expectations for 0.2 percent growth. Multifamily apartment starts declined for the second-straight month, while single-family housing starts rose to their highest level since January. There may be hope for faster growth in housing starts going forward, as building permits rose by 8.4 percent during the month.
• On Friday, we finished the week on a sour note, with the University of Michigan consumer sentiment survey declining from 98.4 in July to 92.1 in August. Both the current conditions and future expectations indices dropped during the month, as stock market turbulence weighed heavily on consumer confidence, and uncertainty surrounding additional tariffs on Chinese goods spooked investors. Consumer spending is highly influenced by consumer confidence, so this will be a key economic indicator to keep an eye on going forward.

Source: Bloomberg

Source: Morningstar Direct

What to Look Forward To
Wednesday will see the release of July’s existing home sales data, which is set to show 2.5 percent month-over-month growth, following a 1.7 percent decline in June. Given low mortgage rates and home builder reports of additional foot traffic, a strong showing here would be a positive sign that prospective home buyers have not been scared away by rising home prices.

The minutes from the Fed’s July 31 meeting are also set to be released on Wednesday. This was a closely watched meeting, as the Fed voted to cut the federal funds rate for the first time in more than a decade, marking a shift toward a more supportive stance for the economy. Economists will be reading the minutes carefully to try to gauge the likelihood of future rate cuts.

Finally, we will close out the week with the release of July’s new home sales data on Friday. New home sales are forecast to decline by 0.2 percent during the month. Sales rose by 7 percent in June, so this projected decline is nothing to worry about—especially if we see growth in existing home sales, which make up a significantly larger portion of the housing market.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2019 Commonwealth Financial Network ®

Presented by Mark Gallagher

General Market News
• The 10-year Treasury yield was as low as 1.47 percent late last week, before opening at 1.61 percent on Monday. The 30-year was below 2 percent for the first time ever. It opened at 2.11 percent on Monday, and the 2-year opened at 1.52 percent. Rates moved significantly lower, raising questions about the timing of the next recession. With yields close to historical lows and the Federal Reserve (Fed) just starting to lower rates, it is likely we will continue to see historically low yields across the curve.
• The S&P 500 fell by 2.9 percent on Wednesday, as investors flocked to safer fixed income assets. This reaction followed a negative gross domestic product print for the German economy for the second quarter (–0.1 percent) and the lowest factory output in China in 17 years. The index recovered in the second half of the week.
• Equity investors also sought out shelter last week in the traditional haven assets with bond proxy sectors, including consumer staples, utilities, and REITs. The top-performing sector, consumer staples, was supported by Walmart’s strong quarter-over-quarter online sales growth of 37 percent.
• Last week’s worst-performing sectors were financials, consumer discretionary, and energy. Wells Fargo and Citigroup were down 4.13 percent and 3.89 percent, respectively. Investors sold out of these positions following a yield curve inversion, which led to concerns over future net interest margins. The inversion earlier in the week came following growth concerns and led to a strong rally in longer-term bonds.
• On Tuesday, July’s Consumer Price Index data was released. It showed inflation of 0.3 percent for the month and 1.8 percent year-over-year. Higher gas prices combined with higher prices for key areas of the service sector were the major drivers of this growth. Despite the increase in July, consumer inflation still sits comfortably below the Fed’s 2 percent target.
• On Thursday, July’s retail sales data came in much better than expected. Sales grew by 0.7 percent during the month, against expectations for 0.3 percent growth. Once again, rising gas prices played a part in this beat. But the major driver for sales growth came from the nonstore sales category, which was boosted by the annual Amazon Prime Day sales event midmonth. This was a very encouraging report, as consumer spending is the major driver of overall economic growth. The strong result for July bodes well for third-quarter growth, as long as consumers continue to spend.
• On a more negative note, Thursday also saw the release of July’s industrial production report, which showed a 0.2 percent decline. This disappointing result was due in large part to a 0.4 percent drop in manufacturing output, where most major industries saw declines during the month. The slowdown in global trade has hurt demand for American goods abroad. Although the slowdown in production was disappointing, it is understandable given the current global trade landscape.
• The National Association of Home Builders Housing Market Index report for August was also released on Thursday. It showed an increase in home builder confidence, marking the second-straight month of increasing confidence. Prospective buyers ticked up to their highest level since October 2018, which could bode well for future home sales if mortgage rates remain low and draw in more would-be buyers.
• Despite the uptick in home builder confidence, construction data was mixed. Housing starts fell by 4 percent in July, against expectations for 0.2 percent growth. Multifamily apartment starts declined for the second-straight month, while single-family housing starts rose to their highest level since January. There may be hope for faster growth in housing starts going forward, as building permits rose by 8.4 percent during the month.
• On Friday, we finished the week on a sour note, with the University of Michigan consumer sentiment survey declining from 98.4 in July to 92.1 in August. Both the current conditions and future expectations indices dropped during the month, as stock market turbulence weighed heavily on consumer confidence, and uncertainty surrounding additional tariffs on Chinese goods spooked investors. Consumer spending is highly influenced by consumer confidence, so this will be a key economic indicator to keep an eye on going forward.

Source: Bloomberg

Source: Morningstar Direct

What to Look Forward To
Wednesday will see the release of July’s existing home sales data, which is set to show 2.5 percent month-over-month growth, following a 1.7 percent decline in June. Given low mortgage rates and home builder reports of additional foot traffic, a strong showing here would be a positive sign that prospective home buyers have not been scared away by rising home prices.

The minutes from the Fed’s July 31 meeting are also set to be released on Wednesday. This was a closely watched meeting, as the Fed voted to cut the federal funds rate for the first time in more than a decade, marking a shift toward a more supportive stance for the economy. Economists will be reading the minutes carefully to try to gauge the likelihood of future rate cuts.

Finally, we will close out the week with the release of July’s new home sales data on Friday. New home sales are forecast to decline by 0.2 percent during the month. Sales rose by 7 percent in June, so this projected decline is nothing to worry about—especially if we see growth in existing home sales, which make up a significantly larger portion of the housing market.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2019 Commonwealth Financial Network ®

Presented by Mark Gallagher

General Market News
• U.S. Treasury rates fell considerably over the past two weeks. In fact, they fell at the fastest pace we’ve seen in some time and are now below where they were prior to the 2016 election. The 10-year Treasury yield is trading at 1.68 percent, quickly approaching its all-time low of 1.35 percent seen in July 2016. The 2-year is at 1.59 percent, and the 30-year is at 2.20 percent. It’s hard to imagine the 10-year was as high as 3.23 percent this past November.
• Despite a lot of volatility, markets were down modestly across the board last week. The volatility was driven largely by China’s response to U.S. tariffs proposed the week prior. China ended all U.S. agricultural purchases, as well as changed its overnight currency rate to roughly 7-to-1 yuan-to-dollars. This action led President Trump to accuse the country of manipulating its currency. It remains to be seen who will take the next step forward in the recent trade spat.
• Investors moved toward safety last week, as utilities, materials, health care, and staples outperformed. The worst-performing sectors were energy, financials, and technology.
• Last week got off to a rocky start with a disappointing result from July’s Institute for Supply Management Nonmanufacturing index. This survey, which measures business confidence for the service sector of the economy, fell from 55.1 in June to 53.7 in July, against expectations for a modest increase. This decline brought the index to its lowest level since August 2016. This is a diffusion index, where values greater than 50 indicate expansion. So, business owners still expect to see growth, but the slowdown in confidence should be monitored.
• On Friday, July’s Producer Price Index was released. Producer inflation rose by the expected 0.2 percent during the month and by 1.7 percent year-over-year. Interestingly, core inflation, which strips out volatile food and energy prices, decreased by 0.1 percent during the month. This was the first decline in core producer prices in two years, and it brought year-over-year growth for core producer inflation down to 2.1 percent.

Source: Bloomberg

Source: Morningstar Direct

What to Look Forward To
This week will begin with Tuesday’s release of the Consumer Price Index for July. Consumer prices are expected to show 0.3 percent growth for the month, which should bring year-over-year inflation up to 1.7 percent. As was the case with producer prices, the core measure of consumer inflation is expected to show 2.1 percent year-over-year growth, which is broadly in line with the Federal Reserve’s stated 2 percent inflation target.

On Thursday, July’s retail sales data will be released. It is expected to show solid 0.3 percent monthly growth. Strong consumer spending was a major driver for second-quarter gross domestic product growth, so continued strength to start the third quarter would be a positive sign.

Also on Thursday, July’s industrial production report is set to be released. Economists expect production to increase by 0.1 percent on a month-over-month basis, which would be a step up from June’s flat result.

Thursday will also see the release of the August National Association of Home Builders Housing Market Index, which is a gauge of home builder sentiment. Home builder confidence is expected to increase slightly, from 65 in July to 66 in August. Confidence rose in July following a surprise decline in June, so another increase in August would be welcome.

On Friday, we’ll see if improved home builder confidence in July translated to more home building, as July’s housing starts and building permits are both set to be released. Both measures of new home building activity are expected to show modest growth in July following declines in June.

Finally, we’ll finish off the week with Friday’s release of the University of Michigan consumer sentiment survey. It is expected to decline from 98.4 in July to 97.5 in August. Stock market turbulence often weighs on consumer comfort, so it should come as no surprise that economists expect the recent market volatility to negatively affect confidence. Despite the projected decline, we’re still well above levels seen in January and February. As such, there is nothing to worry about yet.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2019 Commonwealth Financial Network ®

Presented by Mark Gallagher

Positive July for U.S. markets
Markets had a solid start to the third quarter, with all three major U.S. indices showing gains for July. The S&P 500 returned 1.44 percent during the month, the Dow Jones Industrial Average rose by 1.12 percent, and the Nasdaq Composite gained 2.15 percent.

This positive performance was supported by better-than-expected earnings results. According to Bloomberg Intelligence, companies in the S&P 500 have been outperforming analyst estimates for the second quarter. As of July 31, with 60 percent of companies reporting, year-over-year earnings growth sits at 0.8 percent for the quarter. This result is much stronger than the 2.2 percent decline that was forecast at the start of earnings season in mid-July. Ultimately, fundamentals drive long-term market performance, so this positive surprise for the second quarter is encouraging.

Technicals for all three major U.S. indices were supportive during the entire month of July. All three indices stayed well above their respective 200-day moving averages.

Although U.S. markets had a positive July, international markets pulled back. The MSCI EAFE Index declined by 1.27 percent. Here, concerns surrounding a slowdown in global trade worried investors. The story was much the same for emerging markets. The MSCI Emerging Markets Index was down 1.14 percent for the month. Technicals for both developed and emerging markets remained supportive. In fact, July marks the second straight month that both indices finished the month above their respective 200-day moving averages.

Fixed income had a solid month. The Bloomberg Barclays U.S. Aggregate Bond Index returned 0.22 percent in July. Interest rates declined on the short and long ends of the curve during the month, driving this appreciation. The 1-month Treasury started the month at 2.17 percent and fell to 2.01 percent by month-end. The 10-year Treasury, on the other hand, started July at 2.03 percent and finished with a yield of 2.02 percent.

These declines were driven by the Federal Reserve’s (Fed’s) decision to cut the federal funds rate from a high of 2.50 percent to a high of 2.25 percent at its July meeting. This marks the first time the Fed has cut rates since December 2008. At his postmeeting press conference, Fed Chairman Jerome Powell indicated that future rate cuts are possible—but not guaranteed.

High-yield fixed income also had a positive month. The Bloomberg Barclays U.S. Corporate High Yield Index returned 0.56 percent in July. High-yield spreads declined slightly during the month. Still, they remain well above the lows we saw for much of 2018. As the Fed shifts to a more supportive role for risk assets, there is a chance that spreads could continue to decline going forward.

Consumer spending drives economic growth
In general, the economic data released in July came in better than expected. It showed growth picking up in key areas of the economy. Consumer spending data was especially positive, with 0.7 percent growth in June’s core retail sales. This result capped off a strong quarter for consumer spending, which helped calm fears of a slowdown in economic growth.

Strong consumer spending in the second quarter led to economic growth that was better than expected. The first estimate of second-quarter gross domestic product growth came in at 2.1 percent on an annualized basis. This result is down from the 3.1 percent pace we saw in the first quarter, but it is higher than consensus estimates for a 1.8 percent growth rate. Personal consumption, which grew at a 1.1 percent annualized rate in the first quarter, jumped to a 4.3 percent growth rate in the second quarter.

Increasing consumer confidence supported consumer spending during the month. The Conference Board Consumer Confidence Index was especially impressive. It jumped from 124.3 to 135.7 in July. This is the single largest monthly increase in more than seven years. The index now sits near highs last seen in late 2018, as you can see in Figure 1.

Figure 1. Conference Board Consumer Confidence Index, 1999–2019

A combination of factors was behind this increase in consumer confidence, but one of the primary drivers was the strong June jobs report. There were 224,000 new jobs added in June, against expectations for 160,000. The underlying data was solid as well. Annual wage growth came in at 3.1 percent, and unemployment remained near 50-year lows.

Potential areas of concern remain
Although consumer confidence and spending growth data came in stronger than expected, it was a different story for businesses. The Institute for Supply Management Manufacturing and Nonmanufacturing indices both declined during the month. In fact, the Manufacturing index fell to two-year lows. These drops show slowing global trade is starting to affect business owner confidence. Despite the declines, both indices remain in expansionary territory. Going forward, we are unlikely to see accelerated manufacturing growth in the second half of the year, unless trade picks up notably.

Although business confidence declined during the month, business spending data was a bit more mixed. Durable goods orders rose by 2 percent in June, beating expectations for 0.7 percent growth. This surprising increase was welcome, but it follows a 1.3 percent decline in orders in May. Despite the uptick in June, business investment declined for the quarter. As such, this will be an important area of the economy to watch going forward.

Another key area of the economy to keep an eye on is housing. Existing home sales fell by 1.7 percent in June, against expectations for a more modest decline of 0.4 percent. This marks the 16th straight month of year-over-year declines in existing home sales. There had been some hope for faster sales growth due to declining mortgage rates and a surge of mortgage applications in May. Unfortunately, those hopes failed to materialize in the face of rising prices and lack of supply in some regions.

Shifting policy risks
There were many policy and political updates in July. Here in the U.S., the major story was the Fed’s decision to cut the federal funds rate by 25 basis points at the end of the month. This measure, combined with the early end of the Fed’s balance sheet reduction plan, indicates that the Fed is becoming more supportive of the economy. With lowered interest rates, borrowing costs should decrease for individuals and businesses. In turn, reduced costs should lead to faster growth going forward.

Another key development was the compromise reached by Congress and the White House to pass a budget increasing government spending and suspending the debt ceiling for the next two years. The passage of this bill was a positive outcome for markets as it eliminated a potential source of politically motivated uncertainty for the time being. Further, it prevented another government shutdown as we head toward the 2020 election cycle.

Internationally, the risk of the UK leaving the European Union without a trade deal increased. Theresa May stepped down as leader of the British government. She was replaced by Boris Johnson. A vocal proponent for Brexit, Prime Minister Johnson has stated that he will lead the British exit from the EU by the October 31 deadline, whether there is a trade deal in place or not. Currently, neither side is showing signs of backing down, so this could be an ongoing source of volatility for international markets over the next few months.

Steady economic growth in the face of global slowdown
Risks remain both abroad and at home, but the economic picture is positive. Better-than-expected economic data released during the month shows that American consumers are still willing and able to spend, despite a slowdown in global economic activity. With improving fundamentals, a supportive Fed, and the passage of the budget and debt limit compromise bill, markets could continue on the upward march that we’ve seen for much of the year.

With that being said, there are still potential areas of concern that should be watched. The slowdown in global trade is starting to affect business confidence and could have an even larger effect on markets going forward. Political risks can also pop up at any time. As always, a well-diversified portfolio that pairs an investor’s goals and time horizon is the best path forward in this uncertain world.

All information according to Bloomberg, unless stated otherwise.

Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.

Authored by Brad McMillan, CFA®, CAIA, MAI, managing principal, chief investment officer, and Sam Millette, senior investment research analyst, at Commonwealth Financial Network®.

© 2019 Commonwealth Financial Network ®