The first half of 2018 was marked by fiscal stimulus, rising rates and surging profits. 2019’s first half, in contrast, was the opposite. Fiscal policy-in the form of widespread tariffs or threats of tariffs-is now a headwind, interest rates are dropping and corporate profits are moderating. What a difference a year makes.
What stands out most is the direction of interest rates. Ten-year U.S. treasury yields are now close to 2%, and overseas rates are even lower. In fact, the Financial Times noted in a June 19th, 2019 article that “the global bond market has been buoyed by rising concerns that economic growth is petering out, and bets that central banks in the U.S., Europe and Asia will all have to ease monetary policy to prevent another downturn_the market value of bonds trading at negative yields—once thought to be economic lunacy—rose to a fresh record of $12,5tn, according to Bloomberg data, surpassing the last peak in 2016. The average yield of the global bond market is now just 1.76%, down from 2.51% in November last year.”
To read more, download the full Second Quarter 2019 Investment Perspective.