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Weekly Market Digest: Markets Rally on China Trade Progress

Progress toward a “mini-deal” with China spurred optimism, investor enthusiasm, and turned stocks higher for the week. The US and China appear to have reached an agreement which will increase Chinese agricultural purchases and agree to some intellectual property measures while the US will delay some pending tariff increases. Bond yields rose.

Weekly Returns

S&P 500: 2,970 (+0.6%)
FTSE All-World ex-US (VEU): (+1.9%)
US 10 Year Treasury Yield: 1.73% (+0.21)
Gold: $1,489 (-1.0%)
EUR/USD: $1.104 (+0.5%)

Major Events

  • Monday – The USDA said China increased purchases of soybeans in the final week of September.
  • Tuesday – US producer prices unexpectedly fell in September, possibly signaling a slowing economy but also giving the Fed further room for rate decreases.
  • Wednesday – Greece sold short term debt at a negative interest rate, signaling how pervasive low rates have become and how far the country has come in the last several years.
  • Thursday – OPEC cut its oil demand forecast for a third consecutive month.
  • Friday – President Trump said the US and China agreed to an outline of a “phase one” deal on trade, which would postpone planned increases on tariffs. Stocks rallied.
  • Friday – Mastercard, Visa and others removed themselves as partners of Facebooks proposed Libra currency.

Our Take: Where We’re at with China Trade Talks

Markets were pleased by an apparent agreement on trade with China which will postpone or eliminate tariff increases planned for October. The deal is said to include increased agricultural purchases by China as well as some concessions on intellectual property.

In our view, the overall conflict is really about intellectual property and technology supremacy, with tariffs and purchase agreements acting as bargaining chips. So while it is a positive that talks are showing some progress and the short term trend is now de-escalation, we don’t view Friday’s announcement as a sign that the risks from trade are significantly reduced. Issues related to Huawei Technologies are not part of the current agreement and will likely be more sensitive. The next round of talks is tentatively scheduled for November.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
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