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Global equities wrapped up their most volatile week this year with a broad-based rally on Friday, as a rebound in bond yields eased fears of a recession that had caused such angst earlier this week. Some traders tied Friday's rebound in bond yields to a report that Germany would issue more debt to stimulate its economy. And given the 3% stock market selloff earlier this week and the lack of bad news Friday, conditions were set for a bounce from extremely oversold levels. Still, the major stock averages posted their third straight weekly losses, with the Dow dropping 1.5%, the S&P slumping 1% and the Nasdaq retreating 0.8%.

It was quite a week as traders reacted to back-and-forth trade news, as well as the yield curve inversion. Tariff relief led to big gains on Tuesday as the U.S. delayed some levies on China, but recession fears then took centre stage, with the Dow plunging 800 points on Wednesday and posting its largest decline of the year. Equities then returned to gains amid forecasts of central bank easing and the U.S. and China toning down their trade war rhetoric.

Weekly returns to 16 August 2019
(AUD 5-day return far right- hand column)

Source: Bloomberg

The week for the S&P 500



YTD some solid returns for equity markets

(Global equities in AUD right hand column)

Source: Bloomberg

Similar relationships. Nice tailwind for local USD investors. Weak AUD gives a 4.3% pickup in return.


The Yield Curve - Another interpretation


And…our LAST inversion of the Yield Curve chart...

Looking at the last three 2s10s inversions: When the recession actually began the spread was WAY higher. 80bps in 1990, 70bps in 2001, 96bps in 07.

We're sitting at 5 right now.



  • 10-Year Treasury yield: 1.562%
  • WTI crude oil: +0.8% to $54.92/bbl
  • AUD/USD: 67.85
  • Gold: +1.0% to $1,523.8/oz

The week ahead

Upcoming economic data (U.S.)

The economic calendar is very light with reports on only three days. Existing and new home sales reports could be interesting and the leading economic indicators (LEI) should be of interest. The week includes the minutes from the recent FOMC meeting as well as the annual Jackson Hole Symposium. The theme, “Challenges for Monetary Policy”, could include nearly anything. Markets will be watching. The full agenda is announced on Thursday and we know that Chairman Powell will speak on Friday morning.

The volatility in the bond market has increased the focus on rate cuts, with traders now pricing in a 69% probability of a 25 basis point cut at the September meeting and 31% odds for a 50-point cut.

Source: briefing.com

Charts of the week

1. Market sentiment still Bearish: And that’s Bullish...

Source: Strategas


2. Global Wealth (USD)


Source: Visual Capitalist

3. Amazon: The 800 lb. gorilla of retail

Total returns, last 5 Years...
  • Amazon: +433%
  • S&P 500: +61%
  • Retailers: -5%

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