Navigating Uncertainty Like an Aristocrat!
If you only browsed through recent headlines, you may believe that global markets are awash with good news. Prospects for global trade received a positive boost following a meeting between presidents Trump and Xi at the G20, which is helping the S&P 500 Index approach 3000—a historic nominal milestone. Global growth, while moderating, is still in expansion, and unemployment is at generational lows across developed markets.
Given this positivity, investors are left wondering why business sentiment continues to deteriorate and the US yield curve is pricing a 100% chance of a Fed rate cut in July. What signals should investors be following?
The answer is not obvious. In the US, business sentiment continues to follow Manufacturing PMIs lower, as the IHS Markit US Manufacturing PMI fell to 50.1 in June, suggesting the weakest expansion of the manufacturing sector in nearly a decade.1 This is no doubt due, in part, to the ongoing negative trade escalation between the US and China. Non-manufacturing (or services) have also seen a decline, but at a lower magnitude than manufacturing. With fundamentals in the US deteriorating, but the market continuing to push through new all-time highs, investors face a real challenge in determining how aggressively to invest.