Check out our latest Market Insight Monthly (MIM) for information and analysis on economic data as well as the financial markets.

Summary Points:

• U.S. economic data was mixed in August, reflecting the complicated macroeconomic environment in the midst of high trade uncertainty.  The Conference Board’s Leading Economic Index (LEI) rose 0.5% month over month in July, the biggest gain since September 2018.  The LEI rose 1.6% year over year, signaling future economic growth.  On the flip side, U.S. manufacturing deteriorated further, caving to a global trend of weakness in the sector.  The Institute of Supply Management’s (ISM) manufacturing Purchasing Managers Index (PMI), a gauge of U.S. manufacturing health, fell to 51.2, matching its lowest point since August 2016.
• In a closely watched speech, Fed Chairman Powell said the economy “continued to perform well overall” but he highlighted increasing risks from a deteriorating global economy and uncertainty around trade.  Powell pledged that the Fed would “act as appropriate to sustain the expansion”, potentially laying the groundwork for an additional rate cut when the Fed next meets.
• U.S. equity markets, as measured by the S&P 500 Index, slipped 1.8% in August as escalating trade tensions and concerns the Fed may not cut rates enough led to increased volatility.  Intramonth, the index fell more than 6% below its record high set July 26 before recovering.  International stocks struggled more as the US-China trade conflict, a strong US Dollar and geopolitical uncertainty weighed heavily.  Developed international, measured by the MSCI EAFE Index, lost 2.6% for the month while emerging markets, measured by MSCI Emerging Markets Index, fell 4.8%.
• The bottom fell out of U.S. Treasury yields in August as a combination of global economic uncertainty and stock market volatility pushed investors into U.S. debt.  The 10-year Treasury yield fell 52 basis points (0.52%) to close at 1.50%.  The bond market continued to send a cautionary signal to the stock market as a closely watched part of the yield curve inverted. Specifically, the 10-year Treasury yield dipped below the 2-year Treasury, an event that historically has preceded a recession.
• In the alternatives space, trend-following (or managed futures) continued to perform well gaining 2.8% in August and 10.7% year-to-date as measured by the HFRX Systematic Diversified Index.

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